Springfield Managerial Accounting

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

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