Martin Manufacturing Company Historical Ratios :: essays research papers

Martin Manufacturing CompanyHistorical RatiosRATIOS genuine 2001ACTUAL 2002ACTUAL 2003INCREASE(DECREASE)INDUSTRY AVERAGECurrent proportionality1.71.82.50.71.5Quick Ratio1.00.91.30.41.2Inventory turnover (times)5.25.05.30.310.2Average collection power point (days)50.055.058.03.046.0Total asset turnover (times)1.51.51.60.12.0Debt Ratio (%)45.854.357.02.724.5Times interest earn ratio2.21.91.6(0.3)2.5Gross profit mete (%)27.528.027.0(1.0)26.0Net profit margin (%)1.11.00.7(0.4)1.2Return on check assets (ROA %)1.71.51.1(0.4)2.4Return on common fair play (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)1.2Analysis liquidity The current ratio and quick ratios for the year 2003 atomic number 18 at 2.5 and 1.3, which are both higher(prenominal) than the persistence average. The bon ton has enough to cover improvident term bills and expenses. Both the current and quick ratios are showing an up trend compared to 2001 and 2 002. The current assets diminish by $ 20,264 to $ 1,531,181 and the current liabilities also change magnitude 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 document turnover is almost half compared to the application average, although it managed to increase by 0.3 compared to 2002. The company needs to maintain a eonian cost of goods sold and at the same time manage inventory more efficiently to maintain market competitiveness. The average collection distributor point also increased slightly to 58 days, three days increase compared to 2002. The company needs to negotiate or persuade on efficient payment methods to customers to decrease the collection period down to industry average. The total asset turnover increased 0.1 to 1.6 but still failing to support the industry model of 2.0. Martin M anufacturing needs to boost sales while maintaining a constant asset value to meet or exceed industry standards.DebtThe debt ratios increased by 2.7% to 57% more than double 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 work on step-down long term debts and continue to increase assets. The times interest realise ratio dropped by 0.3 to 1.6 in the year 2003. The company could face difficulties making interest payments in case of a sales slump. ProfitabilityThe pure(a) profit margin is at 27% which is a percent higher than industry standards. The company is performing good and meeting industry standards in terms of cost of goods sold and sales volume. The net income margin decreased to 0.7% in 2003 a decrease of 0.3% compared to 2002.