Entities, despite profitability level, may become bankrupt if it cannot cover obligations with short-term creditors. Liquidity ratios can be calculated from a company’s financial statements to determine their ability to meet short-term credit responsibilities. In most cases, the higher the resulting ratio, the more apt the firm is to pay their duties to creditors in the short-run (Gibson, 2011, p. 210. Vail Resorts days’ sales in receivables was 22.5 in 2010, compared with 21.7 days in the 2009 fiscal year (MSN Money, 2011). This suggests that the number of average days it requires to collect receivables has consistently risen, conveying a negative trend in the degree of control over credit collection. Most significantly, the number of days a debt is outstanding for fiscal year 2010 has increased by 47% since 2008. However, the extraordinarily high ratio results may not be a particularly reliable measure of liquidity due to the largely seasonal operating nature of the ski resort. The accounts receivable turnover ratio uses net sales and average gross receivable figures to produce a result more indicative of their liquidity. The turnover in 2008 was 24.58 times per year. 2009, according to MSN Money (2011), resulted in a turnover of 18.05 times annually. Credit accounts were reconciled 15.56 times per year in 2010. The negative trend appears to have dissipated when looking into 2011’s fiscal quarters; the most recent calculations show a turnover of 28.83 times (Morningstar, 2011). The primary asset used to gauge the ability to repay short-term debt is inventory, accounting for 28 percent of Vail Resorts’ current assets in 2010. For that year, it would have taken 25.57 days to use up inventory levels based on sales figures. ... ... middle of paper ... ...mbol=US%3aMTN MTN - Vail Resorts Inc Financial Ratios - Forbes.com. (2011, August 31). Forbes.com. Retrieved August 31, 2011, from finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=mtn MTN Competitors | Vail Resorts, Inc. Common Stock Stock - Yahoo! Finance. (2011, August 31). Yahoo Finance. Retrieved August 31, 2011, from finance.yahoo.com/q/co?s=MTN+Competitors Vail Resorts Inc. MTN Q4 2010 Earnings Call Transcript . (2010, September 23). Morningstar Stock, Mutual Fund, Hedge Fund, ETF Investment Research . Retrieved August 31, 2011, from http://www.morningstar.com/earnings/earnings-call-transcript.aspx?t=MTN&culture=en-US&pindex=8&qindex=11 SEC.gov. (2009, September 24). Form10k.htm. U.S. Securities and Exchange Commission (Home Page). Retrieved September 2, 2011, from http://www.sec.gov/Archives/edgar/data/812011/000081201109000030/form10k.htm
Credit Risk: Financial instruments that possibly subject the Company to concentrations of credit risk consist of cash equivalents and receivables. Due to its large and varied customer base and its geographic diversity, Saputo has low exposure to credit risk concentration with respect to customer’s receivables. There are no receivables from any individual customer that exceeded 10% of the total balance of receivables as at March 31, 2015 and March 31, 2014. However one customer represented more than 10% of total consolidated sales for the year ended March 31, 2015, with 10.2% (one customer with 11.4% in 2014). Allowance for doubtful accounts and past due receivables are reviewed by management at each balance sheet date. The company updates its estimate of the allowance for doubtful accounts based on the assessment of the recoverability of receivable balances from each customer taking into account historic collection trends of past due accounts. Receivables are written off once determined not to be collectible. On average, Saputo will generally have 10% of receivables that are due beyond normal terms, but are not decreased. However, Saputo management does not believe that these allowances
As of December 26, 2004, our liquid assets totaled $10,924,000. These assets consisted of cash and cash equivalents in the amount of $10,642,000 and short-term investments in the amount of $282,000. The working capital deficit increased slightly from $50,359,000 as of December 28, 2003 to $51,041,000 as of December 26, 2004. This increase was due primarily to increases in the loss reserve and unearned premiums related to the captive insurance subsidiary and accounts payable and was partially offset by increases in inventories and receivables.
The Corporation has sustained losses and negative cash flows from operations since its inception. The Corporation is exposed to liquidity risk as it continues to have net cash outflows to support its operations.
As can be seen from the above, the table shows that both The Hershey and Tootsie Rolls companies have very low receivable period due to the nature of the industry and also reflects the efficient cash management and receivable management on the part of both
Marriott Corporation is an international company who's the growth over the year has been more than satisfactory.
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
Kwon, E. (n.d.). Lodging & Gaming. Standard & Poor's Capital IQ. Retrieved December 1, 2013, from http://www.netadvantage.standardandpoors.com.ezproxy.bu.edu/NASApp/NetAdvantage/showIndustrySurvey.do?task=showIndustrySurvey&code=lng
This ratio shows that a company can operate and meet its current obligations for 258 days and continue being solvent. The number of days significantly increased from 2012 and even 2011, which shows improvement.
In regards to the corporation’s balance sheet, it is necessary to place an importance on liquidity ratios to demonstrate the company’s ability to pay its short term obligations such as accounts payable and notes that have a duration of less than one year. These commonly used liquidity ratios include the current ratio, quick ratio, and cash ratio. All three ratios are used to measure the liquidity of a company or business. The current ratio is used to indicate a business’s ability to meet maturing obligations. The quick ratio is used to indicate the company’s ability to pay off debt. Finally the cash ratio is used to measure the amount of capital as well short term counterparts a business has over its current liabilities.
...To check how successful it has been, we calculate debtor collection period ratio. (Dyson, 2004) Fixed Asset turnover: In this ratio, we seek the amount of sales that can be generated (or the amount of fixed assets necessary to achieve a level of sales) from a given level of fixed assets. (Klein, 1998) Total asset turnover: This ratio determines that how efficiently a firm is utilizing its assets. If the asset turnover ratio is high, the firm is using its assets effectively in generating sales. If this ratio is low, the firm may not be using its assets efficiently and shall either increase sales or eliminate some of the existing assets. (Argenti, 2002) Solvency Ratio Gearing: Gearing reflects the relationship between a company’s equity capital (ordinary shares and reserves) and its other form of long-term funding (preference share, debenture, etc.) (Black, 2000)
Companies will be considered in financial distress when all of their liquidity has to be used to pay their outstanding debt. Companies can file bankruptcy to deal with and manage the lack of liquidity. When a company files bankruptcy the company is protected and bondholder or creditors cannot sue them for money that is owed. According to the authors of Fundamentals of Corporate Finance, “In principal a firm becomes bankrupt when the value of its assets equals the value of its debt.” (Ross...
The overall industry saw a strong boom rate from 2010-2014. The global hotels & motels industry had total revenues of $677.1bn in 2014, representing a compound annual growth rate (CAGR) of 4.6% between 2010 and 2014. In comparison, the Asia-Pacific and US industries grew with CAGRs of 6.6% and 5% respectively, over the same period, to reach respective values of $163.7bn and $166.2bn in 2014(Global Hotels & Motels 7). The reason for this growth is due to the Asia-Pacific Region and Americas. The US alone with its world’s largest hotels/market has conquered net value growth, while China has literally doubled the revenue in the same time span. The leisure segment
Since companies are often unable to sell their fixed assets within any reasonable amount of time they are carried on the balance sheet at cost regardless of their actual value. As a result, it is possible for companies to grossly inflate this number, leaving investors with questionable and hard-to-compare asset figures (Investopedia.com, 2003).
There are many techniques used to manage cash including, the nature of asset growth, controlling assets, patterns of financing, the financing decision, a decision process and shifts in asset structure. For any company the growth of asset results in a growth in wealth if managed effectively. The typical firm usually forecast the rate of sales to ensure that the production of goods match sales so there is not an overflow if inventory. As a company expands and produces more items they will acquire permanent current assets. Permanent current assets can be described as a constant inventory of items because it is almost impossible to predict the market and the demands of the consumer.
Upon examining P&G’s financial ability to meet short-term obligations, it is apparent that not only have their current liabilities exceeded current assets over the last three years, but close to half of their current assets have been tied up in inventories and other illiquid assets. For example, assessing both the quick and current ratio respectively shows that less than 70% of the firm’s current assets could be converted immediately to pay current commitments, but a little more than 90% of the firm’s liabilities would ultimately be covered. Though, based on industry average similar findings occur; therefore, it must not be uncommon for industries similar to P&G to