Business Communication Trend Essay

283 WordsFeb 11, 20122 Pages
After reviewing the financial data for Quality department store for 2004 to 2005 I would invest into this organization in 2006. There are a couple reasons why I would invest into this organization first, Quality has a high return on assets over 15 percent in 2005 increasing from 13 percent in 2004 in addition this is above the industry average of eight percent this means Quality is using assets correctly. The second and most important reason I would invest in Quality department store is the fact that its return on stockholders’ equity has increased from 28 percent in 2004 to 29 percent in 2005 and is above the industry average of 20 percent. This reflects how stockholders view the company and chose to invest or not invest in a company. In addition, Quality’s 29 percent return on stockholder’s equity is higher than its 15 percent return on investments. This means the company earns more on what it borrows from creditors and at a low interest which makes it easy for Quality to pay-off interest at a reasonable rate. In addition, Quality’s price per share increased from 77 cents in 2004 to 97 cents in 2005 so it would make sense to invest in this company. The one important piece of advice I would give to Quality management is to decrease the debt to total asset ratio in 2004 it was 50 percent and decreased to 45 percent in 2005, however, Quality is still higher than the industry average which is 40 percent. This number indicates how much of a company’s assets are from investors. The lower the number the more profitable a company is to investors
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