The current ratio is a liquidity ratio that measures a company’s ability to pay short-term and long-term obligations. They seek to satisfy their liquidity needs through cash provided by operations, long-term secured and unsecured borrowings, issuances of debt and equity securities, asset-backed securitizations, property dispositions and joint venture transactions. They have financed our operations and acquisitions to date through the issuance of equity securities, borrowings under their credit facilities and asset-backed securitizations. Going forward, they expect to meet their operating liquidity requirements generally through cash on hand and cash provided by operations. They believe their rental income, net of operating expenses and recurring …show more content…
The gross profit margin of AMH is increasing slightly from 2014 to 2016 but it is way lower than Terreno Realty Corporation. On December 12, 2014, AMH and their operating partnership entered into a contribution agreement with AH LLC, pursuant to which AH LLC contributed to their operating partnership all of AH LLC's interest in 45 properties owned by AH LLC. The value of the properties was determined by broker price opinions prepared by independent third parties. In exchange for the properties, their operating partnership issued to AH LLC 653,378 Class A units valued at $17.11 per unit, the closing price on the NYSE for the Company's Class A common shares on December 11, 2014. AH LLC was liquidated in August 2016 with its ownership interests in the operating partnership distributed to its members. Return on investment used to evaluate the efficiency of an investment or to compare the efficiency of a number of different …show more content…
On average, it takes approximately 20 to 30 days to lease a property after completing the renovation process. Average collection period is the approximate amount of time that it takes for a business to receive payments owed in terms of accounts receivable. (Investopedia) Compare to competitors, American Home 4 Rent’s average collection period is high but their average collection period has decreased slightly which means they obtained funds from its customers about 100 days faster. They collect the majority of rent electronically via Automated Clearing House transfer or direct debit to the tenant's checking account via a secure tenant portal on our website. Tenants who do not pay rent by the late payment date (typically within five calendar days of the due date) will receive notification and are assessed a late fee. Eviction is a last resort, and the eviction process is managed in compliance with local and state regulations. Such systems make them to possible shortening their average collection
Suppliers are mostly concerned with a company 's ability to pay on their liabilities. Therefore, the current ratio and the quick ratio are both looked at by suppliers. The current ratio takes a company’s current assets and divides that by the company’s current liabilities. This number is
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
Another highlight of the company was the company’s gross margin, which was 32.8 in 2012, just a little more than the 31.9 in 2011 and their selling rate went down by 20.9
In addition, from their financial statements, it appears that they made substantial property purchases in 1995 ($126,000). These were financed them with their revolving loan. One can assume that this expense was a result of their significant increase in sales, but it is generally not a good cash management strategy to use short-term debt to buy long terms assets.
However, financial situation of the firm plays a very important role in the decision of the bondholder and this company has been one of the most profitable companies America in terms of ROE, ROA ad gross profit margin. Apart from decrease in earnings and cash flow in 1997, UST had continuous increases in sales (10-year compound annual growth rate of 9%), earnings (11%) and cash flow (12%). They are generating their cash flows out of the operations. Thanks to their premium pricing, they are achieving more than average gross profit margin. So, over the years UST's revenues are stable and positive, and generally its statements are positive. The company does not have any problems with its cash flow.
Next, given that Tremont has two mutually exclusive options for what to do with their property, it is important to review the different metrics we have calculated and focus on which is the better approach for Tremont. While EAA is calculated in the analysis, the equal timelines of the two mutually exclusive projects are the same, so EAA is largely irrelevant in this case. Additionally, the CFO’s requested Payback Period metric is simplistic and doesn’t consider time value of money, so it also should not be considered. Even Discounted Payback Period, which does take time value of money into account, still is based on an arbitrary cutoff point for decisions, so it is not helpful with our investment decisions. Additionally, Tremont should be looking to generate the maximum amount of value possible from their mutually exclusive projects, rather than just getting their money back as soon as possible.
The second method we used to analyze the firm’s value was the Comparable Companies Method. We used the historical figures as of 1990 and Goldmans Sach’s Projections. With an average of 22.
The main contributing factor to the decline in the return on stockholders’ equity (25.37% to 8.73%) was the decline in the profit margin (11.79% vs. 5.08%). The decrease in asset turnover (1.11 to 1.00) made a small contribution to the decline, as did the decline in the debt ratio (48.4% to 41.8%).
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
The current ratio shows the ability for the company to pay back all liabilities with current assets. The fact that Raytheon has a current ratio above 1:1 means that the company could pay back all liabilities, this shows good financial health for the company.
...el – with its focus on yield, value-added services, high asset utilization and cost management
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.
Quick ratio indicates the short term liquidity position of the company. The quick ratio indicates the company’s ability to meet its short term liabilities with its most liquid assets (Pech, et al., 2015). For assessing the availability of most liquid current assets to pay off current liabilities, the inventory is excluded while computing it. From the above table, it is indicated that in 2013 coca cola had 1.007 of liquid assets available to satisfy its 1 dollar of current liability. In comparison to previous year the liquid assets against single dollar of current liabilities is reduced and in 2014 it is 0.9231 which indicates that now for paying off one dollar of liability, coca cola has less than 1 dollar to pay out its short term liabilities. i.e., its liquid assets have reduced from 2013.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.