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Del Campo Foods - Financial Ratio Analysis

Autor:   •  February 23, 2012  •  Essay  •  528 Words (3 Pages)  •  1,358 Views

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February 14, 2012

To: Jennifer Washburn

Subject: Financial Ratio Analysis

I have conducted the financial ratios of Del Campo Foods by using your financial statements and industry benchmarks. The years that have been analyzed are 2010, 2011, and 2012E. The first ratios will examine the liquidity of Del Campo Foods. The current ratio of assets to liabilities for 2010, 2011, and 2012 are 2.33X, 1.17X, and 2.34X respectively. In the years 2010 and the estimate for 2012E, the current ratio is good because for every dollar that the company owes, it has $2 in assets. In 2010, the current liabilities were very high causing a low current ratio. The current ratio for the industry average is slightly higher than 2010 and 2012 at 2.7X. An acid test was also performed for all three years, and 2011 struggled greatly due the high current liabilities. Even in the years of 2010 and 2012E the acid test ratio was only at about .85 which means that Del Campo Foods cannot pay their current liabilities and should be looked at with caution.

The next ratios analyze asset management using turnover ratios. The inventory turnover ratios were steady across all three years, but they are still about under the industry average by about 2X. A low turnover ratio implies poor sales and higher inventories. The total asset turnover was decent for all three years and just barely under the industry average. The debt ratio is one way to analyze Del Campos Foods debt management. For the years 2010, 2011, 2012E the debt ratio is 55%, 83%, and 44% respectively. The industry average debt ratio is at 50%, so the only year that Del Campo's debt was high was in 2011. This means that the company is unable to meet its financial obligations. For the projected year of 2012, Del Campo has low debt compared to their total assets indicating that the company's level

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