1. RATIO ANALYSIS By Kevin O’Toole

2. Ratio Discussion  Current Ratio-this is the current assets over current liabilities. This ratio should be approximately 2:1. Seemingly, the higher the ratio, the greater the amount of assets. Meanwhile, the lower the ratio, the greater amount of current liabilities. A very low ratio represents the idea that the company’s debt and amounts owed to third parties is too high which shows that the business is too risky for investment. A very high ratio shows that the business does not invest or purchase enough on credit from third parties implying less chances of growth.  Quick Ratio-this is the quick assets over current liabilities. This ratio should be around 1:1. Quick assets are represented by total assets minus investment, otherwise known as inventory. This ratio essentially shows a businesses ability to pay off current liabilities. A low ratio shows that a company has trouble paying off these current debts of less than one year, therefore implying a risky investment. A high ratio implies efficient payment, but less actual initiative towards third parties. Therefore, the finest ratio should be equal (1:1)

3. More Ratios  Debt to Asset Ratio-this ratio means what it says. It is the debt (total liabilities) over assets. Simply, the higher the ratio, the greater the risk. Therefore, investment is suitable in general, if the debt to asset ratio is very low.  Average Collection Period-this ratio represents accounts receivable over average daily sales. In other words, what is owed to you over your sales per day. Firms will increase this number in order to get more sales. If this ratio is too low, no one will invest, but if its too high, the company will go out of business. Therefore, an investor should look at this business if their ratio is in the middle.  Average Days in Inventory-this ratio is simply inventory over average daily cost of goods sold. Average daily cost of goods sold is the daily expenses incurred for selling a product. This ratio measures everything in cost, showing how fast inventory is sold. If this ratio is too high, no one is interested. But, if it is too low, the business does not have enough inventory to supply to consumers.

4. Return on Sales, Assets, and Equity  Return on Sales-this is otherwise known as the Profit Margin. It represents one component which determines the return on assets. Return on sales is represented by income plus interest expense over sales. Obviously, the higher the profit margin, the higher the profitability for the firm. Although profitability is not the main component of investment analysis, it is common sense that you should invest in a firm with high profit margins.  Return on assets-this is return on sales times asset turnover which is sales over assets. Return on assets are subjective based on comparisons of past and future ratios. This means that a good return on assets is only good if it has improved. Thus you can determine an efficient return on assets if the ratio will go higher in the future.  Return on Equity-this is net income over stockholders’ equity. This is the owner’s return on an investment. Obviously, a higher return on equity is better for the owner and the investor. One can determine if they should invest if the business is making good use of borrowed funds. This can be determined if the return on equity is higher than the return on assets. This only occurs when one’s return on assets is greater than one’s cost of borrowing.

5. Ratios Table DivisionCurrent Ratio Quick RatioDebt to Asset Ratio Average Collection Period Average Days in Inventory Division A2.851.670.3945.6360.83 Division B3.552.140.2339.7560.83 Division C4.402.980.2246.3660.54 Firm Total3.452.140.2743.7060.75

6. Return Table DivisionReturn on SalesReturn on AssetsReturn on Equity Division A6.63%14.75%22.01% Division B9.46%18.26%22.35% Division C7.40%13.30%15.25% Firm Total10.34%20.45%26.47%

7. Analysis DivisionCurrent Ratio Quick RatioDebt to Asset Ratio Average Collection Period Average Days in Inventory Division AVery GoodGoodDecentVery GoodDecent Division BDecent Very GoodExcellentDecent Division CPoor Very Good Decent Firm TotalDecent Very Good Decent

8. DivisionReturn on SalesReturn on AssetsReturn on Equity Division AGood Excellent Division BGoodVery GoodExcellent Division CGood Very Good Firm TotalGoodExcellent Analysis

9. General Strengths And Weaknesses  StrengthsWeaknesses  AHigh current ratioHigh Risk  Good Collection PeriodsLower Consumer Interest   BHigh Debt to AssetLittle 3 rd Party Investment  Good Collection PeriodsLow Chance of Growth   CHigh Debt to AssetLittle 3 rd Party Investment  Good Collection PeriodsLow Chance of Growth   FHigh Debt to AssetLittle 3 rd Party Investment  Good Collection PeriodsLow Chance of Growth   All Firms have exceptional Returns on Sales, Assets, and Equity (see Chart)

10. Returns Table

11. Grading Grading Scale Excellent 6 Very Good 5 Good 4Division Results Decent 3Division A: 30Division A Poor 2Division B: 36Division B Very Poor 1Division C: 30Division C FirmFirm: 35