Nabors Financial Analysis

Submitted by: Submitted by

Views: 189

Words: 675

Pages: 3

Category: Business and Industry

Date Submitted: 11/26/2012 08:55 AM

Report This Essay

Nabors Industries Financial Statement Analysis

The liquidity of a company determines how many assets can become cash quickly. This ratio is used by short term lenders to determine risk level of a potential client. The higher the current ratio the lower the risk. Liquidity ratio analysis for Nabors show a current ratio or 1.71 and a quick ratio of 1.56 for the 2011 year. The current ratio should be at least 2:1 and the quick ratio 1:1. The ratios tell the short term lenders that they are of moderate risk because Nabors has the assets to cover a loan but below the national standard. The quick ratio is typically at least one less than the current ratio. Inventory levels are low compared to the national average, which could mean the sales of the company have increased in the last few years.

Debt is what the firm relies on to finance investments and to show how well they can manage their debt, repayment of obligations. Debt also gives tax benefits. The debt ratios of the company were debt/equity 1.29 and debt/asset .56. This shows that there are more assets than liabilities and more liabilities than equity. The company is doing well. In comparison to last year they have added equipment and increased equity and assets. They are able to manage their finances well.

Profitability ratios determine how well the company is doing in the aspect of revenues and profits. The net profit margin decreased by 1% from 2010 to 2011 for Nabors. This result shows that revenues increased significantly to create a larger profit after taxes. Return on assets increased by .2% which states that the assets in comparison to profits has not really changed. Return on equity increased by 2% meaning equity elevated.

A few various ratios that give a good look at how the company is doing are the following: Inventory turnover decreased from 29.90 to 26.17. The company is not moving its inventory as fast as it has in the past which can cause alarm to investors. Total Assets...