Financial Analysis of a Manufacturing Company: A Closer Look at Ratios
How is the financial status of the manufacturing company based on the given data?
What are the profitability, liquidity, and efficiency ratios calculated for the company over the last three years?
Financial Status of the Company
The efficiency ratio is 8.00 while the liquidity ratio is 2.74. The manufacturing company's profitability ratios indicate a decline in net profit over the three-year period. Liquidity ratios show improved liquidity position, while efficiency ratios suggest a decline in inventory turnover and receivables collection.
Profitability Ratios
The gross profit margin shows a declining trend, indicating decreasing profitability. Net profit margin has also declined over the years, suggesting a decrease in overall profitability.
Liquidity Ratios
The current ratio has shown an improvement over the three-year period, indicating a stronger liquidity position. The quick ratio has remained relatively stable, showing consistent ability to meet short-term obligations.
Efficiency Ratios
The inventory turnover has decreased, suggesting slower inventory movement and potentially inefficient inventory management. Receivables turnover has also decreased, indicating longer time taken to collect receivables and potential cash flow difficulties.