Martin Manufacturing Company Historical Ratios :: essays research papers

Martin Manufacturing communityHistorical RatiosRATIOSACTUAL 2001ACTUAL 2002ACTUAL 2003INCREASE(DECREASE)INDUSTRY reasonableCurrent symmetry1.71.82.50.71.5Quick Ratio1.00.91.30.41.2Inventory turnover ( whiles)5.25.05.30.310.2 ordinary collection period (days)50.055.058.03.046.0Total asset turnover ( time)1.51.51.60.12.0Debt Ratio (%)45.854.357.02.724.5 generation interest earned ratio2.21.91.6(0.3)2.5Gross profit margin (%)27.528.027.0(1.0)26.0 mesh profit margin (%)1.11.00.7(0.4)1.2Return on total assets (ROA %)1.71.51.1(0.4)2.4Return on common equity (ROE %)3.13.32.5(0.8)3.2Price / earning (P/E) ratio33.538.734.5(4.2)43.4Market/ book (M/B) ratio1.01.10.9(0.2)1.2AnalysisLiquidity The on-line(prenominal) ratio and quick ratios for the year 2003 argon at 2.5 and 1.3, which are both higher than the industry average. The association has abundant to cover short term bills and expenses. Both the current and quick ratios are showing an upward trend compared to 2001 and 2002. The cur rent assets decreased by $ 20,264 to $ 1,531,181 and the current liabilities also decreased considerably by $255,402 to $616,000, a 29.3% decline, thus qualification the current ratio jump to a 2.5. The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %. ActivityThe inventory turnover is approximately half compared to the industry average, although it managed to increase by 0.3 compared to 2002. The company needs to throw a constant cost of goods sold and at the same time manage inventory more efficiently to maintain market competitiveness. The average collection period also increased slightly to 58 days, trey days increase compared to 2002. The company needs to negotiate or carry on efficient payment methods to customers to decrease the collection period megabucks to industry average. The total asset turnover increased 0.1 to 1.6 but slake failing to meet the industry standard of 2.0. Martin Manufacturing needs to boost gross revenue while maintaining a constant asset value to meet or exceed industry standards.DebtThe debt ratios increased by 2.7% to 57% more than ingeminate the industry standard of 24.5%. The long term debt increased from $700,000 to $ 1,165,250 an increment of 66.5% in the year 2002. The company is currently highly leveraged thus it needs to roleplay on reducing long term debts and continue to increase assets. The times interest earned ratio dropped by 0.3 to 1.6 in the year 2003. The company could face difficulties making interest payments in case of a gross revenue slump. ProfitabilityThe gross profit margin is at 27% which is a percent higher than industry standards. The company is performing good and clashing industry standards in terms of cost of goods sold and sales volume. The final income margin decreased to 0.7% in 2003 a decrease of 0.3% compared to 2002.