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Category: Business and Industry
Date Submitted: 05/19/2011 07:08 PM
Presentation to Stakeholders
David Carlson
ACC 230
February 20, 2011
Anne Klemme
Presentation to Stakeholders
As we can see from looking over the many financial statements they contain important information that creditors look at. The ability of the company to meet debts as they come due is measured by the current ratio. The conversion of cash and other current assets shows what cash can be made available. The current liabilities are used as the denominator for the ratio to represent the urgent debts, due within one year or the current operating cycle.
The current ratio for REC Inc indicates that the 2007 yearend was able to cover the liabilities, which were down from 2006. Each of the three debt ratios measures the extent of the company to finance the debt. The debt from the capital structure is important as a financial indicator because of the difference between the risk and the returns. This involves some risk because debt carries some fixed commitments in interest charges and the principal payments. Bankruptcy can result from failing to satisfy the charges associated with the debts. If the company has too much debt it can a difficult time obtaining additional debt financing when needed.
The accounts receivable, inventory, and payables turnover ratios will be use to show how many times on average the accounts receivable are collected, inventory is sold, and payables are paid throughout the year or operating cycle. The three measures are used as complements to the ratios that make up the cash conversion cycle and shows the average of the collection period, days inventory held, and days payable outstanding for the company. These are used as an different way to look at the information from the company to convert the accounts receivable into cash 24 times in 2007 which was up from 18 times in 2006. The inventory turned over 2.75 times in 2007 which in 2006 was 2.5 times. Which means that the inventory was selling faster and that the payables are...