Adobe Systems Finance Paper

Adobe Systems Incorporated was founded in December 1982 by Charles Geschke and John Warnock. Warnock and Geschke established the company after leaving Xerox Corporation in order to develop and sell the PostScript page description language. The company name Adobe came from Adobe Creek that ran by their homes in Los Altos, California. In 1985, Apple Computer licensed PostScript for use in its LaserWriter printers, which helped spark the desktop publishing revolution. (Funding Universe)

Adobe is a desktop publishing software provider that develops software like design and illustration software, image editing, and electronic document technology. Adobe invented PostScript, which is a concatenative programming language. Adobe's products include Photoshop, Audition, ColdFusion, LiveCycle, Portable Document Format (PDF), PostScript, Flash, Dreamweaver and many more. (Adobe) All of these products are used in computers every day and they all help make life much easier for businesses around the world and for people to manage their business as well as many other aspects of their lives. Adobe pushes the boundaries of innovation so it makes peoples' lives much more exciting, fulfilling and manageable.

There are five categories of ratios for the firm: liquidity ratios, long-term solvency ratios, asset turnover ratios, profitability ratios and market value ratios. Among the liquidity ratios is the current ratio, Adobe's seems to be somewhat inconsistent as it decreases from $4.26 in current assets for every $1 current liabilities in 2006 to $3.02 in current assets for every $1 in current liabilities in 2007. It then increases to $3.59 in current assets for every $1 in current liabilities in 2008. When the current ratio is high, the company is more liquid. And the higher the current ratio for the company generally means the company has good short-term financial strength. The smaller the ratio suggests that the company would be unable to pay off its obligations if they came due at that point. (Investor Words) So even though Adobe's current ratio is inconsistent it still has very good short-term financial strength.

In the long-term solvency category is the Total Debt ratio, which takes all debts of all maturities to all creditors into account. The firm's total debt ratio in 2006 was $.1359, which means Adobe acquires about 14% of its assets with borrowed money. This total debt ratio increased to $.1862 in 2007 and $.2424 in 2008. This shows that Adobe is acquiring more assets with borrowed money each year rather than acquiring assets with equity financing. The higher the total debt ratio goes the greater probability of default.

The asset turnover category contains the receivables turnover ratio which measures the ability to manage collections of customer accounts. The company's receivables turnover ratio in 2006 was 5.5118 times. This number increased in 2007 when it was 6.7587 times. It then increased