Beacon Lumber Analysis

Beacon lumber analysis

Current ratio can measure the ability of the company to paid its short-term debt with their currently resources. The rule of thumb indicated that a company should have the ratio between 1.0 and 2.0. The current ratios of Beacon Lumber during November 2009 to January 2010 are 40.06886782, 4.384552725 and 4.551608547 respectively.

The current ratios of Beacon Lumber are too high during these three months, which means Beacon Lumber is inefficiently using its resource. These also suggest there are problems in manage their working capital.

The debt-to-equity ratio measure a company's financial leverage, suggesting the proportion of equity and debt the company used to finance its asset. The debt-to-equity ratios of Beacon Lumber Company from November 2009 to January 2010 are 1.181047492, 1.230387896 and 1.14884363. These three ratios are all above1.0 showing that the majority of assets are financed through debt, which means the company strategy is aggressively generating more earnings. At the same time, Beacon Lumber Company should carefully handle this aggressive strategy and protect stockholder’s right.

The gross profit ratio implied whether the company is efficiently in generating profit on every dollar of sales. Beacon Lumber Company has the gross profit ratio 0.373 at the end of January, silently lower than previous month’s percentage. They should manage sales and cost more carefully.

Return on sales ratio is helping to insight into how much profit is being produced per dollar of sales. Higher return on sales ratio demonstrates that the company has less financial risk. The return on sales ratios of Beacon lumber company decreased from 0.280623552 in November to 0.144518606 in January. This circumstance indicted Beacon lumber company fails to turn operating income to company’s revenue.