The following memo will explain the findings of the financial statement analysis for 2008 for Berry’s Bug Blasters as well as offer advice significant decreases in profits or increases in liabilities if they apply.
Some quick facts: Liquidity is up for 2008
Current ratio shows we pay assets 5.99 times for every current liability, an increase of 62% from 2007 Significant liquidity ratio decrease in 2008 was in inventory turnover Inventory tuning over 6.67 times per year, down 42% from 2007 Berry’s Bug Blasters inventory turnover is affecting the profits. The profitability ratios decreased with the stockholders’ equity decreasing the most by 56%. The interest expense for 2007 and 2008 has been eliminated. Berry’s Bug Blasters total debt was decreased to assets by 24% in 2007 to 16%, the company’s number now shows solvency. In order to determine if a company will meet short term debt obligations liquid ratios are used by businesses and investors. Berry’s Bug Blasters has proven short term obligations 5.99 times to 1 liability. At the point when an owner or investor evaluates an organization’s liquidity ratios, they are utilizing data from the Balance Sheet to evaluate if an organization has the assets and the ability to pay off short term liabilities. Berry’s Bug Blasters have met the mark. Stakeholders use profitability ratios to pick up understanding on the adequacy or sufficiency of an organization’s profits.
Loaning organizations and investors will utilize profitability ratios to help focus the conceivable financial related profits for the investment into that particular organization. Administration inside of an organization can use profitability ratios to issue territories inside of the organization and make any vital enhancements to enhance execution in those areas. The accompanying attachments will demonstrate that we have decreased in the amount of profit margin. This decrease demonstrates that business has hindered in 2008. Berry’s Bug Blaster may need to look over marketing methodologies to produce more business in the impending year. Solvency ratios are for the most part utilized by long term lenders and stakeholders. Both clients are utilizing solvency ratios to focus the long term quality and survival of an organization.
Long term monetary quality of an organization is essential to these clients to demonstrate that an organization will have the capacity to pay off debt and accrued interest of a mature debt. Berry’s Bug Blasters has made a decent showing of decreasing the measure of amount of total debt to assets. Generally speaking, Berry’s Bug Blasters is in great financial health in correlation to others in the business. An intercompany near analysis was performed utilizing our organizations nearest traded on an open market contender, Rollins Inc. Like Berry’s Bug Blasters, Rollins Inc. provides pest and termite control services to business and private customers.
The Rollins Inc. SEC filed 10-K for the period ending 12/31/08, the attached ratio, horizontal and vertical analysis are the source documents for the data below. The profit margin is by far the most valuable accounting aspect for any company. Berry’s Bug Blasters has doubled the profit margin (16%) other than Rollins Inc. (6.6%) In regards to solvency, Berry’s Bug Blasters incurred no interest expense while Rollins Inc. paid $761,000 interest expense. Another commonly used profitability ratio used primarily by investors is the return on common stockholders’ equity. Berry’s Bug Blasters and Rollins Inc. performed splendidly and tied at 30%. The ratio, horizontal, and vertical analysis performed managers, creditors, and investors can see that Berry’s Bug Blasters remains competitive, and is a valuable investment. I hope you have gained further insight into the financial health of Berry’s Bug Blasters.
Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2010). Financial Accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.
Apollo Group Virtual Organization. (2011). Berry’s Bug Blasters. Retrieved from:https://ecampus.phoenix.edu/secure/aapd/CIST/VOP/Business/Berrys/index.asp on July 24, 2015.