The paper “ Financial Management - Theory and Practice” is a forceful example of a finance & accounting assignment. In reference to the liquidity ratios, the current ratio of East Coast Yachts current ratio is lower than the median industry ratio. This shows that the firm has less liquidity compared to the industry. The current ratio is greater than the lower quartile this implies that there exist other firms with less liquidity within the industry (Ehrhardt & Eugene, 91). The firm may possess more expected cash flows or easier means to short-term debt.
The turnover ratios appear to be greater compared to the industry median actually all are greater than the upper quartile. This implies that the firm utilizes its assets efficiently to generate sales. The financial leverage ratios appear to be lower than the industry median but higher than the lower quartile. This implies that the firm is less indebted compared to others in the industry but still falls in the normal range. East Coast Yacht’ s profit margin is almost equal to the industry’ s median. Return on assets for the firm is greater than the industry’ s median but by a small margin.
The Return on Equity is greater than the industry median. This implies that the profitability is high. East Coast Yachts’ has satisfactory performance, although attention is needed in the liquidity ratios. c) Creating Inventory RatioInventory to current liabilities ratio East Coast Yachts is lower, the current ratio is lower, but the quick ratio is higher in comparison to the industry median. This means that East Coast Yachts has few stocks to current liabilities compared to the industry median (Ehrhardt & Eugene, 92).
Since the cash ratio is less compared to the industry median, East Coast Yachts has fewer stock compared to the industry median, but more accounts receivable. d)Interpretation of the RatiosCurrent ratio: Good (Well managed current accounts. )Bad (Liquidity issues)Quick ratio: Good (Well managed current accounts. )Bad (Liquidity issues)Total asset turnover: Good (Well utilized assets. )
Work CitedEhrhardt, Michael C, and Eugene F. Brigham. Financial Management: Theory and Practice. Mason: South-Western Cengage Learning, 2011. Print.