2. I utilized an “Acid Test Ratio” which shows us whether the entity could pay all its current liabilities if they became due now or sooner than expected. In 2011, the acid test ratio was 0.64. By 2012, it decreased to 0.43. Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities.
Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide. The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government's support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup. The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans.
A number of areas could be the reason for the decrease in sales in year 8 including the economy which could have led to outside sponsorships being decreased. However CBI is continuing to plan for growth in a 3.2 % increase that is greater than could be a reality and a concern for such percentage. There is no historical data to show that a plan is in place to achieve this additional sales increase and coming off a hard economic year, it is concerning that this achievable. The Selling, General and Administrative Budget is another area to review for concerns in the budget planning area. Advertising is budgeted at a flat percentage of 2% of gross profit or $28,412 for year 9 and this has remained consistent for each of the previous 3 years.
Thus, Alliance needs to focus on improving operating efficiencies by investing in capital improvement. Capital Improvement • Spend $2 million on expenditures before the start of the year so the risk of break down is less than 50%. • Since forecasting the balance sheet for 2006 shows Alliance EFN’s is about $14 million, the company can borrow an additional $14 million from the bank to make the balance sheet balance. • With the $2 million on expenditures spent in 2005 plus the additional $14 million borrow from the bank for 2006, the company can be able to fulfill the $16 million planned on capital expenditure. Capital improvement can save the company on unexpected cost and long-term shut down.
The author of this article, Jeannine Aversa, is stating that key economic indicators point to the likelihood of a recession. Aversa supports her thoughts by noting the real GDP; “crawled at a 1.3 percent pace in the opening quarter of 2007…even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.” The author suggests the main cause of the economic slowdown is due to “the housing slump.” Consumer expenditures are driving the economy, but Aversa worries about a “fallout from risky mortgages and rising energy prices.” Uncertainty of the Feds actions concerning the interest rates is leading to lower investment spending. The author also states that the Feds decision on raising or lowering the interest is due to the
Livoria Sandwich Inc. is operating in a highly competitive and fast growing market. In 2011, the company had only 0.29% profit margin. In order to seek competitive advantage and gain market share, Livoria needs to cover its current cash shortage before going any further. In this memo, three strategic alternatives are evaluated; and recommendations and implementation plans will be given to cover Livoria’s short-term cash shortage, gain market share, and earn $1.1 million net income by 2014. Situational Analysis As shown in Appendix 1; in 2011, Livoria generated 53% contribution margin which is almost 10% higher than the industry average.
Quick ratio Current ratio measures the current assets to be turned into cash to meet its debts in one year. Quick ratio is a more immediate measure of liquidity to obtain the cash. Again, Premier Investments Ltd dropped sharply on quick ratio from 3.48 to 1.40. However, David Jones Ltd only got 1.29and 1.18 for quick ratio. It is a bad signal for David Jones Ltd that is lower than 1.
Notwithstanding increasing dividends and a moderately stable share price, the home improvement retail industry remains to struggle due to the fragmentary world wide economic complications. Throughout 2009 Home Depot recorded expenses as much higher as well as the drop in sales. While Home Depot the company is very strong, the drop in sales and net earnings brought fourth some restraints until the economy shows signs of improvement. With this in mind The Home Depot, Inc. initiated strategies in the fiscal year 2008, to help minimize losses while maintaining a strong customer base. Which in turn may have the company to increase their credit programs for consumers with the intention to increase sales.
At the same time, there are increasing concerns about the fact that concentration in the financial system has increased; big banks may feel less competitive pressure to lend – despite the fact that they are highly profitable. The “Too Big to Fail” bailout of our big banks will have the most resounding effect on economic future. The latest quarterly report from the Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program (TARP), is the best official articulation yet of why Too Big To Fail is here to stay in the United States – and we are likely on the path to these institutions (Johnson & Kurtz, 2011) becoming Too Big To Save. There are moral hazard and potentially dire consequences associated with the continued presence of financial institutions that are deemed ‘too big to
m. a meeting was held by the FOMC (The Federal Reserve, 2011). Reports say developments in domestic and foreign markets are evident since the last FOMC meeting on June 21-22, 2011 (The Federal Reserve, 2011). An indication proved the recovery of the economy remained slow in recent months (The Federal Reserve, 2011). Labor markets conditions remained weak, and the recent recession was deeper than previously thought according to the Bureau of Economic Analysis (The Federal Reserve, 2011). This was realized by the real gross domestic product and how it did not attain its pre-recession peak by the second quarter of 2011 (The Federal Reserve, 2011).