Strang Steel Essay Example | Topics and Well Written Essays - 1250 words

Strang Steel - Essay simulationGross Profit Margin This ratio tells the profit of the firm in relation to sales, after the be of producing the goods is deducted. Over the three twelvemonths, the gross profit has been declining masking the inefficiency of Strang Steels operations.Net Profit Margin This ratio depicts the profit in relation to sales that a firm earns after taking account of all the expenses and taxes. It tells a firms net income income per dollar of sales. The net profit has also been declining over the three years showing that Strang Steels sales profitability has diminutiond. This could be attri besidesed to the expenses rising steadily over the three years and eating out of the profits.Return on equity This ratio shows the return earned on the funds invested by the shareholders of the go with. This ratio is also on the decline over the three years showing that the shareholders are getting less and less of their worth and the company is providing weak investm ent opportunities.Current Ratio This ratio measures the firms ability to meet short-term obligations. It shows the effectiveness of the utilization of electric original assets to meet short-term liabilities. Strang Steels present-day(prenominal) ratio has declined steadily in the three years showing that the current assets are proving less and less useful in meeting the current liabilities and hence the inability of the company to pay its bills.Quick Ratio This ratio is more conservative in its approach to measuring a firms liquidity position as it excludes inventories (the least liquid portion of the current assets). This ratio is between currents assets excluding stocks and current liabilities. From the year 2003 to 2004, the quick ratio has increased showing that the firm is efficiently meeting its short-term obligations but from year 2004 to 2005, the ratio has dipped showing the current assets have non been utilized in the priggish manner to maintain the rising trend of th e previous years.Average Collection Period This ratio tells us the ordinary number of geezerhood that receivables are outstanding before being collected. From the year 2003 to year 2004, the days have risen showing that Strang Steel has a very lenient policy with regard to ingathering its receivables and the debtors are taking a long time in paying their dues. Having too many receivables is not good for the money as a lot of money is tied up which could be invested elsewhere. However, from the year 2004 to 2005, the number of days has sharply declined showing the change of the managements policy regarding receivables and the debtors paying up in only when 20 days. Inventory dollar volume in Days This ratio illustrates the number of days on average before inventory is turned into accounts receivables through sales. The number of days has declined over the three years showing that Strang Steel has gotten effective each year in turning its inventory into sales.Total Asset Turnover This ratio shows the relationship of sales to total assets. This ratio has increas