Fallow the instrcsion Case Study Example | Topics and Well Written Essays - 500 words

Fallow the instrcsion - Case Study Example Based on the results of the ratio analysis, Seward Inc. is a weak player in the international trade finance market due to the loss made from its trading activities. After having realized net sales of $ 4, 500, Seward Inc. made a net income of $ 315 despite the $ 1,700 gross profit realized before deducting corresponding expenses. Unfortunately, net income is prone to criticism from managers as it increases from earnings gained from discontinued operations. Investors ought to focus on measures such as cash flows, sales, or profits before considering interests and taxes. Efficiency in a company operation prevails through total asset turnover, fixed asset turnover, and equity turnover. Total Asset Turnover is a ratio used to measure the ability of a business to generate sales given its sales in total assets. The rate tends to be lower in capital-intensive businesses compared to non-capital-intensive businesses. A firm is said to be efficient if it meets a total asset turnover of 1 and above. Having a Total asset turnover of 1.6, Seward Inc is a profitable company. On the other hand, liquidity is the ability of a business to cater adequately for its financial obligations upon the occurrence. Current ratio is the best liquidity determinant followed by acid ratio. The industry recommends a current ratio of 1 and above. The rate increases with the financial position of the company. Seward Inc. is in sound financial position as the current ratio of three indicates that it can pay its short-term obligations. Damodaran (2012) acknowledges operating leverage as a change indicator in operating income caused by a change in sale. Leverage ratio is any rate used in calculatin g the company financial leverage to know how it can meet its financial obligations. An operating profit margin 8.0 percent indicates better performance of the firm. Seward Inc. is capable of meeting its short-time obligations due to its current ratio of 3.0 and Acid 1.5. The rates