Finacial Statement

Financial Statement Analysis

Team A

Shajuan Gray

Accounting/561

July 7, 2011

Gentian Mataj

Financial Statement Analysis by Shajuan Gray

In the industry of retail sales, there are a variety of key different elements that are imperative to the financial stability of a company. One thing for certain is that sales and losses must be tracked and closely monitored. Businesses must perform specific tasks to stay abreast of where, what and how a company is performing, and comparative ratios. This paper will explain the quick ratio and current liquidity ratio of retail sales as well as present details regarding DuPont ratio, profit margin, asset utilization, and the financial leverage of retail sales.

Quick ratios in retail sales measure the ability of a company to get quick assets to eliminate current liabilities. Quick assets involve current resources that can be quickly converted to cash at close to their book values. The formula used to determine conversion to cash is: Quick Ratio=Current Assets-Inventory ÷ Current Liabilities.

The liquidity ratio in company retail sales is the most used of all of the ratios. Liquidity ratios are examined by banks, when they are performing evaluating a loan application. This is how the banks provide a customer with a certain minimum ratio, attached to the loan agreement.

DuPont ratio allows stock analyst, and investors to examine profits by using income statements, and balance sheets. DuPont uses the formula: Return on Assets (ROA) = Profit Margin x Total Asset Turnover, however this formula can be expanded into ROA= (Net Income/ Sale) x (Sales / Total Assets).

Profit margin is very helpful when it comes to comparing companies, that profitable. Profit margin is a percentage for example: 20% profit margin means the company has a net of $0.20% for each dollar of sales. It measures how much out of every dollar of sales a company, and keeps in earnings. Asset Utilization measures the efficiency that...