Calculate Financial Ratios

Running head: CALCULATE FINANCIAL RATIOS

Calculate Financial Ratios

Rachelle Ligans

University of Phoenix

Business Systems I

BSA/500

Brian Keltch

June 09, 2012

Calculate Financial Ratios

Calculating financial ratios provides important information to business owners and potential investors or other stake holders. In this paper financial ratios have been calculated for both Riordan Manufacturing and Kudler Fine Foods. A comparison of the P/E ratio for businesses in the same industry as the Riordan and Kudler has been provided as well.

In an attempt to calculate the Current Ratio and Debt Ratio together with the ROA for Riordan Manufacturing, along with a comparison of the P/E ratio compared to Formosa Plastics shows that Riordan’s Current Ratio = Current Assets/Current Liabilities. The Current Ratio is 2.1, while the Debt Ratio = Total Debt/Total Asset, the Debt Ratio is 0.5. The Profit Margin = Net Income /Sales; which shows the Profit Margin to be 0.03. Over the period of 2004 through 2005 the company has shown a decrease of 34% in current Ratio’s 2.43% (04) to 2.09% (05). (Riordan Manufacturing). The P/E for the Manufacturing Industry is 0.5. Formosa Plastics PE is 2.6 xs which is higher compared to the manufacturing industry (Formosa Plastics). Kudler fine foods, has the following Ratios, Current Ratio 16.9, Debt Ratio 0.83, Profit Margin 0.1, ROA’s 0.6. The P/E for food retail industry is 0.03, the P/E for Kudler is 0.4, it is noted that a company that has a rating of 0.2 or better is considered