JB Hunt's Financial Analysis: 2011 Performance Insights

Analysis, Pages 7 (1681 words)

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In 2011, JB Hunt's balance sheet reveals that their current assets total $513,542,000 and their current liabilities amount to $438,515,000. This leads to a current ratio of 1.17, indicating that for every $1 of current liabilities, JB Hunt possesses $1.17 worth of current assets. The current ratio has grown by 29% compared to the previous year (2010), increasing from 0.91 to 1.17.

While this improvement suggests an enhanced capability for JB Hunt in obtaining short-term financial assistance compared to 2010, it still falls below the secure risk benchmark of 2 established by lenders for short-term credit approval.

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Lenders may also consider other factors such as comparing JB Hunt's current ratio with competing trucking companies when evaluating their level of risk. Another measure employed is the quick ratio or "acid-test," which assesses a company's cash, securities, and accounts receivables relative to its current liabilities.

In 2011, JB Hunt's quick ratio stands at 0.95 compared to 0.70 in 2010.The quick ratio holds particular significance for companies facing challenges in rapidly converting inventory into cash since it can impact their ability to fulfill short-term debt obligations.

A quick ratio between 0.50 and 1.0 is generally considered acceptable but indicates potential issues with cash flow. JB Hunt has increased its quick ratio by 36% compared to the previous year, demonstrating its improved ability to fulfill short-term obligations. The company's debt to stockholders equity ratio is 299% for 2011 and 242% for 2010, reflecting its reliance on borrowed funds for operations. A ratio exceeding 100% suggests excessive debt and inadequate equity to repay it if necessary. With a debt to equity ratio of 299%, JB Hunt has a significantly high level of debt relative to its equity, making it too risky for investors and lenders seeking investment opportunities or loans.

JB Hunt's basic earnings per share ratio in 2011 was 1.07, while it was 0.79 in 2010. This ratio reflects the profit earned by the business for each share and indicates its potential growth and ability to distribute dividends to shareholders. Moreover, there was a significant increase of 35% in JB Hunt's basic earnings per share compared to the previous year, which highlights their reinvestment for further expansion.
Furthermore, JB Hunt's return on sales ratio was 94% in 2011 and 92% in 2010. This demonstrates the company's exceptional ability to generate income from sales and services when compared to its competitors.

JB Hunt's sales ratio increased by 2% compared to the previous year, resulting in a remarkable 94% sales ratio when compared to three other analyzed companies. However, determining the competitiveness of this ratio against other trucking companies would require further research and analysis beyond the scope of this assignment.
In 2011, JB Hunt achieved a return on equity ratio of 45%, surpassing the 35% ratio from 2010. The equity ratio serves to assess risk by measuring how much profit a company generates for every shareholder dollar invested. JB Hunt's equity ratio of 45% is considered profitable, especially since any ratio exceeding 15% is considered a reasonable return. Moreover, this represents a significant 29% increase from the previous year.

UFP Technologies manufactures plastic products.

The 2011 balance sheet for UFP Technologies reveals that the company possesses $58,040,394,000 in current assets and $9,465,304,000 in current liabilities. Consequently, the current ratio stands at 6.13 signifying that the company holds $6.13 of current assets for each dollar of current liabilities. This represents significant growth compared to the previous year's ratio of 47.62 (mainly due to asset acquisition). Lenders typically perceive organizations with a current ratio of 2 or higher as low-risk candidates for short-term credit. With a current ratio more than three times above what is considered safe, UFP Technologies should face no difficulty in obtaining short-term credit if necessary. Furthermore, the company achieved an impressive quick ratio of 4.80 in 2011 and 36.12 in 2010—four times greater than what is usually deemed satisfactory.

UFP Technologies has a low debt to stockholders equity ratio of 29% for 2011 and 38% for 2010, indicating that they do not heavily rely on borrowed money for operations. This makes them a safe investment or reliable source for short-term funding.

The company's basic earnings per share ratio increased by 7% from the previous year, with ratios of 0.77 in 2011 and 0.72 in 2010, suggesting available funds for reinvestment and further growth.

Additionally, UFP Technologies' return on sales ratio remained consistent at 12% for both years.

The lack of change in the ratio from the previous year suggests that the company may not be keeping up with its competitors in generating income from sales and services. In 2011, UFP Technologies' return on equity ratio was 17%, while it was 18% in 2010. This ratio assesses risk by showing how much a company earned per dollar invested by shareholders. With an equity ratio of 17%, UFP Technologies is considered profitable as investors typically see a ratio over 15% as a reasonable return. However, there was a decrease of 5.5% compared to last year's ratio, which could disappoint shareholders who expect annual increases rather than decreases.

United Natural Foods, Inc. is a specialty food store.

In 2011, United Natural Foods had a current ratio of 18.22, indicating that the company had $18.22 of current assets for every $1 of current liabilities. This represents a significant increase of 1,229% compared to the previous year's ratio of 1.37. Lenders typically consider organizations with a current ratio of 2 or higher to be a safe risk for short-term credit, so United Natural Foods would be viewed favorably by lenders if it needed short-term credit.

The quick ratio for United Natural Foods was 0.59 in 2011 and 0.44 in 2010. The quick ratio is important for companies struggling to convert inventory into cash quickly. A quick ratio between 0.50 and 1.0 is generally seen as satisfactory but may indicate potential cash-flow issues.

Although the quick ratio improved from the previous year to reach 0.59 in 2011, it is still relatively low and suggests that United Natural Foods may face financial difficulties impacting its ability to pay off short-term debt.

In 2011, United Natural Foods had a debt to stockholders equity ratio of 61%, which decreased from the previous year's ratio of 98%. This ratio evaluates the company's reliance on borrowed money. If the ratio exceeds 100%, it indicates that the business has more debt than equity, posing a risk for debt repayment. However, United Natural Foods significantly reduced its dependency on borrowed funds by decreasing the debt to equity ratio by 37% compared to the previous year. This reduction makes the company more appealing to investors or lenders as it suggests a lower level of risk compared to before.

Regarding earnings per share, United Natural Foods achieved a ratio of 0.80 in 2011 and 0.79 in 2010. This represents the profit earned per outstanding share of common stock. The company experienced a positive growth in earnings per share with an increase of 1.2% from the previous year, indicating progress towards greater profitability per share and future company expansion.

Despite the economic situation in the past 5 years, United Natural Foods has shown positive growth. In both 2011 and 2010, they achieved a return on sales ratio of 3%, indicating consistent performance and income generation from sales and services. The unstable economic conditions may have deterred potential new customers seeking expense reduction. When evaluating risk, United Natural Foods had a return on equity ratio of 9% in 2011 compared to 11% in 2010, measuring profit per dollar invested by shareholders. However, disappointingly, the equity ratio for United Natural Foods decreased by 2% in 2011 which may disappoint shareholders. Typically, investors consider a ratio exceeding 15% as representing a reasonable return.

Wells Fargo is a mortgage company.

In 2011, Wells Fargo had $1,313,867 million dollars in current assets and $920,070 million dollars in current liabilities, resulting in a current ratio of 1.43. This means that the company had $1.43 of current assets for every $1 of current liabilities. Compared to the previous year's ratio of 1.48, there was a decrease of 3.4%. Lenders typically consider an organization with a current ratio of 2 or higher to be a safe risk for short-term credit; therefore, based on the current ratio alone, Wells Fargo is considered risky for lenders. However, considering the economic circumstances of the past five years, lenders may also take into account other factors such as comparing Wells Fargo's current ratio to that of competing companies.

In terms of quick ratio (which measures cash, securities and accounts receivables compared to current liabilities), Wells Fargo had a quick ratio of 0.07 in 2011 and 0.11 in the previous year. A quick ratio between 0.50 and 1.0 is generally seen as satisfactory but with some potential cash-flow issues.

Wells Fargo's quick ratio falls below the minimum satisfactory level by 0.43 points.

The company is at risk of not being able to quickly convert inventory into cash and may default on its short-term debt, which threatens investors and lenders. In 2011, Wells Fargo's debt to stockholders equity ratio was 827%, compared to 884% in 2010. This ratio evaluates the company's reliance on borrowed funds for its operations. A ratio above 100% suggests excessive debt and insufficient equity to repay it if necessary. With a debt to equity ratio of 827%, Wells Fargo has an exceptionally high level of debt relative to its equity, making it undesirable for investors and lenders. Furthermore, in 2011, Wells Fargo had a basic earnings per share ratio of 1.50, while in 2010 it was 1.18, indicating the profit earned per outstanding common stock share.

The increase in Wells Fargo's earnings per share ratio by 27% from the previous year suggests that the company has enough funds to invest and promote its growth. Moreover, when compared to competitors, Wells Fargo's return on sales ratio was 48% in 2011 and 36% in 2010, demonstrating its ability to generate income from sales and services.

Wells Fargo's sales ratio has increased by 12% compared to the previous year, indicating significant efforts to regain competitiveness. The company's return on sales ratio is currently at a high number of 48%.

In terms of the return on equity ratio, Wells Fargo achieved 11% in 2011 and 10% in 2010. This ratio measures the profit generated for each dollar invested by shareholders, assessing risk.

An 11% ratio may be considered disappointing as investors typically seek ratios above 15%. However, it represents a slight improvement from the previous year and suggests that Wells Fargo is working towards recovery and profitability, making it more attractive to lenders and investors once again.

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References

The information was obtained from the Annual Reports section of the website http://www.sec.gov, as well as from the book "Core Concepts of Accounting" by Raibom, C.A. (2010), published by John Wiley & Sons Inc. The retrieval date for this information is 06/28/2012.