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Springfield Managerial Accounting

The document contains an analysis of Dawson Stores, Inc's financial ratios over a 4 year period performed by SpringField National Bank. It finds that the company's liquidity, as measured by current and acid ratios, has weakened over time. However, return on assets and equity have increased, indicating better utilization of funds and increasing earnings. Several debt ratios like debt-equity, debt capitalization, and cash flow to debt have also decreased, demonstrating the company is taking on less risk over time. The conclusion is that the company's overall financial position and risk exposure have improved during the 4 years under review.

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2K views

Springfield Managerial Accounting

The document contains an analysis of Dawson Stores, Inc's financial ratios over a 4 year period performed by SpringField National Bank. It finds that the company's liquidity, as measured by current and acid ratios, has weakened over time. However, return on assets and equity have increased, indicating better utilization of funds and increasing earnings. Several debt ratios like debt-equity, debt capitalization, and cash flow to debt have also decreased, demonstrating the company is taking on less risk over time. The conclusion is that the company's overall financial position and risk exposure have improved during the 4 years under review.

Uploaded by

classmate
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

SPRINGFIELD

NATIONAL BANK

Presented By Group A
Performance Ratios

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Liquidity Ratios
§ Generally a current Ratio of 2 is considered
as indicative of adequate liquidity.
§ The current ratio has decreased down to
1.67
§ Acid Ratio of 1 is considered normal
§ But it is deteriorating over the 4 years
§ so the company has somewhat weak
liquidity

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Return On Assets
 ROA is a useful measure to evaluate how
well an enterprise has used its funds
 Since, it is increasing over the past 4 years
the company is utilizing its funds better

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Return on Equity
 Important to current stakeholders and
perspective investors
 Relates earning to owners investments
 Average ROE for most investment
companies was 7% to 10%
 ROE has increased from 8%-14%
 The reason for this is the debt financing
pattern of the company

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Financial Position

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Financial Leverage Ratio
 Leverage means using given resources in
such a way that the potential outcome is
magnified
 It is expressed as total assets as times of
the shareholder’s equity
 The FLR is almost constant over the given 4
years
 This indicates that the company is using
the same fraction of shareholder’s equity
on assets

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Debt Equity Ratio
 Indicates the ratio to which business relies
on debt financing
 Upper Acceptable limit is usually 2:1
 With long term debt no more than 33%
 High debt ratio indicates a possible
difficulty in paying interest and principal
while obtaining more funding
 Company’s debt equity ratio is decreassing
implies that company’s reliance on debt is
decreasing

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Debt Capitalization Ratio
 By using this ratio investors can identify the
amount of leverage utilizes by the company
 It helps to compare the co. with others and
analyse the comapnys risk exposure
 Cos that finance a greater portion of their
finance by debt are considered riskier
 Here,Debt Capitalization Ratio is decreasing
 Thus, the cos. Risk exposure is reducing over
the years

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Cash Flow/ Debt
 Cash Flow/ Debt is increasing
 This implies that the company is recording
better cash flows
 This implies an improving financial position
for the company over the 4 years

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Working Capital
 The working capital indicates the measure of
funds available to purchase inputs and
inventories after the sale of current assets
and pay-offs of all current liabilities
 The company’s working capital is increasing
 This implies that company’s purchasing power
is increasing over the 4 years

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


CONCLUSION
 Over the 4 years, the financial position of the
company is improving
 This can be concluded from the following
ratios as mentioned earlier:
 D/E ratio
 FLR
Ø Also, the debt/capitalization ratio is
decreasing
Ø Thus the risk associated with the company is
also reducing
Ø As a result, Stefanie Anderson should conclude
that it a good credit risk

SpringField National Bank - Financial Analysis for Dawson Stores, Inc


Thank You!

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