Denver Manufacturing Corporation

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Denver Manufacturing Corporation

• Ratio Analysis for each Division
• Year ending December 31, 2001

By Lyndsey Maiorano
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Denver Manufacturing Corporations Divisions

• Division A
• Division B
• Division C

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Comparison Chart of Divisions
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Division A
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Division A Analysis

• Strengths
• Return on Equity is greater than Return on
  Assets they are making good use of borrowed
  funds.
• Current ratio is the closest to 2 out of all the
  divisions.
• Best Quick Ratio

• Weaknesses
• Debt to Asset is almost .4 which is the highest
  of the 3 divisions (RISK)
• Average Collection Period is a little high, it
  may become a risk, because the longer it is, the
  more likely the division is not to get paid

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Division B
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Division B Analysis

• Strengths
• Return on Equity greater than Return on Assets
  (good use of borrowed funds).
• Average Collection Period is the lowest of all
  divisions
• Return on Sales is the greatest out of the 3
  divisions
• Debt to Asset Ratio- MUCH lower than the others,
  and at about .2, which is very good, they are
  more likely to pay back loans, etc. looks good
  to banks.

• Weaknesses
• The highest current ratio it is almost double
  the rule of thumb.

8
Division C
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Division C Analysis

• Strengths
• Current Ratio (almost same at Div. A)
• Return on Equity greater than Return on Assets
  (good use of borrowed funds).
• Quick Ratio (almost same as Division A)

• Weaknesses
• Highest Average Days in Inventory that could be
  a potential risk
• Debt to Asset Ratio is high (but not the highest
  of the 3)

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Corporate (company as a whole)
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Corporate Analysis

• Strengths
• The Return on Equity is greater than the Return
  on assets the corporation is making good use of
  borrowed funds.
• Also a high Return on Equity which is good
• Avg. Days in inventory is okay for this
  corporation, just have to make sure it is not too
  little or too much or there could be a potential
  risk

• Weaknesses
• Current Ratio is about 3 but it should be around
  2
• Average Collection Period is okay, but maybe a
  little high (potential risk if it increases)
• Quick Ratio a little high should be around 1 to
  1