Hi, I am looking for someone to write an article on management and control of financial resources Paper must be at least 2250 words. Please, no plagiarized work! The acid-test ratio of Canada Corporation Ltd is 75% or 0.75 which is less than one. This signifies that the company cannot meet its current liabilities signifying a case of caution (Investopedia, 2010).
The receivable turnover ratio of the company is 3.2 which is roughly half as per industry norms of 6.0. This ratio measures the effectiveness of the company in granting credit and collection of debt. The low ratio of Canada Corporation Ltd implies that the credit policy of the company is lax i.e. credit is being granted without an accurate assessment of the debtor’s credit record.
The inventory turnover ratio of the company is 1.7 which is less than half the industry norms of 4.0. The low ratio signifies that the sales of the company are poor resulting in a high level of inventory. This indicates inefficient inventory management. The Tangible Asset turnover ratio of the company is 0.67 implying that the company is not able to utilize its asset base effectively. The tangible asset turnover ratio is a measure of a firm’s efficiency in asset utilization. The low turnover ratio of Canada Corporation implies that the company is not able to generate sales.
The long term debt to total capitalization is 54.5% signifying that the company uses a large amount of debt in the capital mix. This is not in the financial interest of the company as overexposure to debt may lead to financial burden thwarting the future growth prospects of the business.
The gross profit margin and the net profit margin of the company is 40% and 10% respectively. The net profit margin is less as compared to the industry norms of 15%. A low net profit margin indicates that the management of the company needs to exercise control over the administrative and other overhead expenses.
As evident from the ratio table, all the ratios have deteriorated over the last three years except Return on equity (ROE). The company reported ROE of 25% in 2007 that went up to 30% in the following year and .fell marginally to 29.30% in 2009. .