Simpson Baked Goods Company Financial Statement Analysis

To: Homer Simpson

From: Michael Chang; Student Number: 10041670; Section 4

Date: September 28th, 2012

RE: Simpson Baked Goods Company Financial Statement

The financial statements of Simpson Baked Goods Company have been reviewed by Michael Chang of Queen’s Commerce.

Current Ratio: 2,093,124/842,072 = 2.49

According to the company’s improving, and above industry average current ratio; of which contain values greater than 1, it shows that the company is able to meet it’s upcoming short term financial obligations because of its high liquidity.

Quick Ratio: (34,175+1,101,195)/842,072 = 1.35

The company’s improving and above average quick ratio shows that the company can meet it’s immediate obligations because it has more existing cash and near-cash resources combined than liabilities.

Average Age of Inventory: (957,754/5,063,368)*365 = 69.04 days

The long average age of inventory of the company could mean the company is having a difficult time managing its inventory or the product it’s producing is not attractive to the consumer. This could be a concern so the company should look into improving its inventory system and their product roadmap.

Average Collection Period: 1,101,195/(6,937,525/365) = 58 days

The company needs to watch out for it’s average collection period because it’s on a steady rise and could potentially lead to the company not having enough cash to pay back their immediate expenses. However, the company is not at a crucial state in this category because of its high current ratio.

Total Asset Turnover (Times): 6,937,525/4,271,875 = 1.62

The company has a below industry average total asset turnover ratio, showing that is has not been able to use its assets to produce revenue as well as its competitors.

Debt Ratio:...