Financial Health Of A Company Case Study

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A Company’s Financial Health When people look to invest in a company it is important to understand the financial health of a company. The reason the financial health of a company is important to see how risky investing in that company would be. When a company is making billions in sales this does not always indicate they are better than a company making millions in sales. Simply using the amount of sales a company does is not enough to determine the financial health of a company. The financial ratios help determine the financial health of a company. There are nine ratios that can be used to help determine the company’s financial health. • Current Ratio = Current Assets/Current Liabilities o The current ratio is used to determine the company’s …show more content…

• Profit Margin=Net Income/Sales o Measures how much profit the company is making. • Return on Assets = Net Income/Total Assets o Indicates how profitable a company is • Return on Equity = Net Income/Equity o Return on equity measures a corporation 's profitability by revealing how much profit a company generates with the money shareholders have invested Best Buy Best Buy is an electronic and appliance consumer retailer taking a lead in providing technical products, services and solutions. A Best Buy store is within 15 miles of 70% of the U.S. population. Best Buy also operates in Canada, Mexico and online. Current CEO Hubert Joly, joined the company in September 2012. Joly has help the company improve their sales after the economic downturn. Best Buy is a public company (NYSE: BBY), currently the stock trades at $35.36. Best Buy Ratios 2014 Best Buy Ratio Current Ratio 2.047 Quick Ratio 0.997 Cash Ratio 0.523 Debt Ratio 0.652 Inventory Turnover 0.609 Receivables Turnover 3.237 Profit Margin 16.25% Return on Assets 4.92% Return on Equity 0.173 The healthy range for a current ratio is 1.5 to 3, Best Buy is at 2, which outs them in the healthy

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