Busn460 Financial Analysis

Individual Financial Analysis Report

Konstantin Radionov

BUS460 - DeVry University

November 13, 2011

Introduction

We all know that the success of a business depends on its ability to display profits over the long periods of time while being able to cover all of its financial obligations for its shareholders. Business must be able to maximize on available opportunities efficiently and use the resources it has to create maximum value for all involved stakeholders. Performance of a company can be measured in critical areas such as profitability, its ability to stay afloat, the amount of debt it generates and the effectiveness of resource utilization. Proper financial analysis creates a snapshot of company performance and future prospects. Financial analysis is also a very useful technique that forms a basis for taking key decisions about company operations (Russel, P. R., 2004). Also to internal company members such as leaders and the company board, these are used by potential investors and shareholders to make investment decisions about the company (Finch, H., n.d.). In the excel sheet provided with this assignment, ratio analysis is performed. It shows the details on how the ratio is computed and meaning and importance of the numbers, which provide a very good snapshot of CanGo performance.

The different types of ratios which are used for analyzing a firm are defined and broken down below.

Inventory Turnover Ratios

The two inventory ratios determine the effectiveness with which the company is able to sell its inventory and collect receivables, which is critical for successful utilization and an indicator of how effectively it’s operating. The first ratio is called inventory turnover ratio, which is calculated by dividing the cost of goods sold by average inventory. The inventory turnover ratio is an indicator of how many times the company is able to turnover its inventory, meaning better utilization of it. The higher the ratio, the better the company is...