Inner City

1. Financial symmetrys Liquidity Ratio measure the availability of cash to lucre debt. Current Ratio = Current assets/ Current Liabilities 262,515/ 285,030= 0. 92 There is a problem meeting its short term obligations The best way to improve this balance and better position the business to cover its short-term obligations is to better manage current liabilities (accounts payables).Generate more profit (cash) out of each sale by increase profit (as long as it is competitive within the industry), reducing be of uncorrupteds sold (making the product with less cost or providing services with less costs) or finding efficiencies throughout the operating cycle. Asset Management Ratio indicate how successfully a accompany is utilizing its assets to generate revenues. Inventory Turnover= COGS/ Average roll 1,428,730/ 18,660= 76. 57 Indicate a shortage or inadequate blood levels, which may lead to a loss in business.Average days to sell the inventory= 365 days/ inventory turnover ratio 365/ 76. 57= 4. 8 Measure of the number of times inventory is sold or use in a time period (a year). A low turnover rate might point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. On the other hand, a in high spirits turnover rate might indicate inadequate inventory levels, which can lead to a loss in business, as the inventory is too low (stock shortages). Receivables Turnover= Sales/ Accounts Receivable 1,784,080/ 242,320= 7. 36 A low ratio implies the company should re-assess its credit policies in order o ensure the timely collection of imparted credit that is not earning interest for the firm. Days Receivable= 365/ Receivables Turnover 365/7. 36= 49. 6= 50 The receivables turnover ratio is used to calculate how well a company is managing their receivables. Total assets turnover= Net Sales Revenue/ Average Total Assets 1,784,080/ 294,565= 6. 06 Measures the efficiency of a Co. use of its assets in generating sales revenue. Companies wit h low profit security deposits tend to have high asset turnover, while those with high profit margins have low asset turnover. Debt Management Ratio measure the firms use of Financial Leverage and ability to avoid financial distress in the long run. The use of debt can improve returns to stockholders in good years and increase their losses in bad years. Debt Ratio= Total Liabilities (Total Debt)/ Total Assets (285,030+ 15,000)/ 294,565= 1. 02 All assets argon financed by creditors and some losses are cover by creditors. Indicates the proportion of a companys debt to its total assets. It shows how much the company relies on debt to finance assets. The higher the ratio, the greater the risk associated with the firms operation.A low debt ratio indicates conservative pay with an opportunity to borrow in the future at no significant risk. Profitability Ratio represents the % of total sales that Co. retains subsequently incurring the direct costs (variable costs) associated with produc ing the goods sold. Return on Assets= Net Income/ Average Assets 17,610/ 294,565= 5. 98% Indicates that the company is asset heavy. Net Profit Margin= Net Income/ Sales Revenue 17,610/ 1,784,080= 0. 987% A high percentage of each dollar generated by the company in revenue is actual profit Gross Profit Margin= 1,784,080-1,428,730)/ 1,784,080= . 20% Indicates that gross margin isnt large enough to cover other expenses beyond cost of goods sold. Purpose of margins is to determine the value of incremental sales, and to guide pricing and promotion decision. disposition and monitoring gross margins can attend business owners avoid pricing problems, losing money on sales, and ultimately stay in business. Helps avoid offering prices that are too low or have costs that are too high to ultimately make a profit. 2. Strengths, Weaknesses, Opportunities, and Threats Strengths Fast Service/ delivery- supplied paint to contractors within 24 hours, -Steady growth in its market, -Competitive price , -Cheap rent/ low overhead costs- gives a competitive advantage, -Cheap employee wages- nonunion organization, -Low production costs- low cost and high quality paint, -Excess mental object Weaknesses -Unorganized- operating with no management or financial controls, -Lack of arranged and reliable inventory control system, -No customer record (manual count) wastes too much time, -No office space, no billing records, no shipping information -Undesirable ocation and building is in poor condition old plant, and old equipment (dusty, dirty environment) -No sales personnel, -No computer, no database, -Inexperienced/ unskilled employees, -Lack of perpetration and employee empowerment -Narrow product line, -Bad cash flow insufficient financial resources to fund any changes, -Culture, -Lack of customer confidence customer perception as a company that negotiates price and unreliable to fill large orders. -Lag between time when they are paying their suppliers and employees versus time it ta kes to collect receivables from customers (30-60 days) Opportunities Expand product range go after different segments, -Purchasing a computer to organize data and reduce needless paperwork, -Increase market share by taking large orders, -Hiring professional salesmen to ensure consistent growth and accountants/ consultants to identify problems and solutions Lower cost of goods sold, lower expenses due to Walshs salary, and lower bad debt. Threats -Market is in slow growth- housing market and overall economy, -High negotiate power of suppliers -High threat of substitutes larger Co are more reliable Threat of new entrants,low entry barriers in paint manufacturing industry -Rumors that company is in difficult financial straits- unable to pay suppliers and owes a lot for payment on previous taxes, -No audit has been performed= IRS penalties Wash did not include his income taxes in his income story he owes $38,510 in taxes. 3. Recommendations Within 30 Days Pay his taxes before he gets audited Collect bad debt from clients Hire personnel to assist in heterogeneous tasks -Salesmen and accounting managers Grow business and solve current financial problems Within 90 Days Inner City Paint should keep records of inventory, finances, billing info. -They should raiment in a computer and keep all records in a database to automatically calculate changes. Take a cut in high salaries get down and research new suppliers -To be able to provide timely delivery for large orders Minimize COGS Beyond 90 Days Buy more equipment and trucks mend management skills and create policies Earn business of larger clients Manage business and growth of the company and to be able to acquire companies in the future that help attaining a larger market share.