# Shauna

Submitted by: Submitted by

Views: 194

Words: 1014

Pages: 5

Date Submitted: 11/12/2012 05:28 PM

Report This Essay

Analysis:

-draw analysis about the company’s future liquidity and solvency.

Liquidity （流动性）: the company needs to generate sufficient revenue from the sales, or have enough cash on hand to cover salaries for employees, money to suppliers and financial institutions.

Solvency (盈利能力): the ability of an organization to meet its long-term expense obligations and to profitably grow the company.

Efficiency （效率）: how effective the company is in deploying its resources and managing its operational processes.

Financial capacity: the company’s cash reserves and borrowing power.

Ratio analysis for 2011

Profitability ratios:

Return on assets (ROA): = net income / total assets = 51673/4271875 = 1.2%

For each \$1 of assets SBGC deployed, they put \$0.012 (1.2%) in their pocket. SBGC is not doing good on allocating its resources , because ROA gives investors an idea of how effectively the company is converting the money it has to invest into net income. SBGC has a low percentage comparing with its industry average. SBGC should work on their management decisions on how to deploy its resources and organize investments.

Return on Equity (ROE): = Net income / total equity = 51673 / 1836906 = 2.8% (profitability)

For each \$1 of invested capital provided by shareholders, the company generates \$0.028 in net come. Poor management.

Current ratio: current assets / current liabilities = 2093124 / 842072 = 2.49

In 2011, SBGC has \$2.49 in current assets for each \$1 it has in current liabilities. The company must have a current ratio of 1.0 in order to stay solvent. In this scenario, SBGC is solvent. Comparing 2011’s value with the previous two years’ data, the firm has been improving its liquidity gradually. This means that the company is more liquid in 2011 and has enough current assets to meet its current debt obligations.

Quick ratio: (current assets - inventory) / current liabilities = (34175 + 1101195) / 842072 = 1.34

SBGC can meet its short-term debt obligation...