SPRINGFIELD
SPRINGFIELD
NATIONAL BANK
NATIONAL BANK
Presented By Group A Presented By Group APerformance Ratios
Performance Ratios
SpringField National Bank - Financial Analysis for Dawson Stores, Inc SpringField National Bank - Financial Analysis for Dawson Stores, Inc
Liquidity Ratios
Liquidity Ratios
§
§ Generally a current Ratio of 2 Generally a current Ratio of 2 is consideredis considered as indicative of adequate liquidity.
as indicative of adequate liquidity.
§
§ The current ratio has decreased down toThe current ratio has decreased down to 1.67
1.67
§
§ Acid Ratio of 1 is considered normalAcid Ratio of 1 is considered normal
§
§ But it is deteriorating over the 4 But it is deteriorating over the 4 yearsyears
§
§ so the company has somewhat weakso the company has somewhat weak liquidity
Return
Return
On
On
Assets
Assets
ROA is a useful measure to evaluate howROA is a useful measure to evaluate how
well an enterprise has used its
well an enterprise has used its fundsfunds
Since, it is increasing over the past 4 yearsSince, it is increasing over the past 4 years
the company is utilizing its funds better the company is utilizing its funds better
SpringField National Bank - Financial Analysis for Dawson Stores, Inc SpringField National Bank - Financial Analysis for Dawson Stores, Inc
Return on Equity
Return on Equity
Important to current stakeholders andImportant to current stakeholders and
perspective investors perspective investors
Relates earning to owners investmentsRelates earning to owners investments
Average Average ROE ROE for for most most investmentinvestment
companies was 7% to 10% companies was 7% to 10%
ROE has increased from 8%-14%ROE has increased from 8%-14%
The reason for this is the debt financingThe reason for this is the debt financing
pattern of the company pattern of the company
Financial Position
Financial Position
SpringField National Bank - Financial Analysis for Dawson Stores, Inc SpringField National Bank - Financial Analysis for Dawson Stores, Inc
Financial Leverage Ratio
Financial Leverage Ratio
Leverage means using given resources inLeverage means using given resources in
such a way that the potential outcome is such a way that the potential outcome is magnified
magnified
It is expressed as total assets as times of It is expressed as total assets as times of
the shareholder’s equity the shareholder’s equity
The FLR is almost constant over the given 4The FLR is almost constant over the given 4
years years
This indicates that the company is usingThis indicates that the company is using
the same fraction of shareholder’s equity the same fraction of shareholder’s equity on assets
Debt Equity Ratio
Debt Equity Ratio
Indicates the ratio to which business reliesIndicates the ratio to which business relies
on debt financing on debt financing
Upper Upper Acceptable limit is usually Acceptable limit is usually 2:12:1
With long term debt no more than 33%With long term debt no more than 33%
High debt ratio indicates a possibleHigh debt ratio indicates a possible
difficulty in paying interest and principal difficulty in paying interest and principal while obtaining more funding
while obtaining more funding
Company’s debt equity ratio is decreassingCompany’s debt equity ratio is decreassing
implies that company’s reliance on debt is implies that company’s reliance on debt is decreasing
Debt Capitalization Ratio
Debt Capitalization Ratio
By using this ratio investors can identify theBy using this ratio investors can identify the amount of leverage utilizes by the company
amount of leverage utilizes by the company
It helps to compare the co. with others andIt helps to compare the co. with others and analyse the comapnys risk exposure
analyse the comapnys risk exposure
Cos that finance a greater portion of theirCos that finance a greater portion of their finance by debt are considered riskier
finance by debt are considered riskier
Here,Debt Capitalization Ratio is decreasingHere,Debt Capitalization Ratio is decreasing
Thus, the cos. Risk exposure is reducing overThus, the cos. Risk exposure is reducing over the years
Cash Flow/ Debt
Cash Flow/ Debt
Cash Flow/ Debt is increasingCash Flow/ Debt is increasing
This implies that the company is recordingThis implies that the company is recording
better cash flows better cash flows
This implies an improving financial positionThis implies an improving financial position
for the company over the 4 years for the company over the 4 years
SpringField National Bank - Financial Analysis for Dawson Stores, Inc SpringField National Bank - Financial Analysis for Dawson Stores, Inc
Wor
Wor
king Capit
king Capit
al
al
The working capital indicates the measure of The working capital indicates the measure of funds available to purchase inputs and funds available to purchase inputs and inventories after the sale of current assets inventories after the sale of current assets and pay-offs of all current liabilities
and pay-offs of all current liabilities
The company’The company’s working capital s working capital is iis increasingncreasing
This This implies implies that that company’company’s s purchasing purchasing powerpower is increasing over the 4 years
CONCLUSION
CONCLUSION
Over the 4 years, the financial position of theOver the 4 years, the financial position of the company is improving
company is improving
This can be concluded from the followingThis can be concluded from the following ratios as mentioned earlier:
ratios as mentioned earlier:
D/E ratioD/E ratio
FLRFLR
Ø
ØAlso, Also, the the debt/capitalization debt/capitalization ratio ratio isis decreasing
decreasing Ø
ØThus the risk associated with the company isThus the risk associated with the company is also reducing
also reducing Ø
ØAs a result, Stefanie Anderson should concludeAs a result, Stefanie Anderson should conclude that it a good credit risk
that it a good credit risk
SpringField National Bank - Financial Analysis for Dawson Stores, Inc SpringField National Bank - Financial Analysis for Dawson Stores, Inc
