Rose Dickens Acct 2090-901 STRENGTHS & WEAKNESSES OF CRAZY A’s The financial ratio data for Crazy

A’s Horse Trailers display important strengths and weaknesses. Although it has a few strengths, the weaknesses are more numerable. It appears that their short term liquidity is declining, collection time is increasing and cash flows from their operations are negative. On the other hand, their operating profit margin is steadily increasing and their return on equity has increased in 2008 over the prior year. A review of the liquidity ratios does not present a positive picture, even though the current and quick ratios are close to average for the industry. They are declining, and there is no cash flow liquidity available, displaying the the company’s struggle to pay its short term debts. Asset management ratios also show a negative. Crazy A’s appears to take longer to collect fees and their inventory is held a month longer than the industry average. The number of days it takes them to pay their debts is also on the rise. Although it was less in 2009 compared to 2008, it has increased since 2007. Total asset turnover seems to be close to average for the industry, but they are at a decline along with the fixed asset turnover, which is much less than the industry standard. This may be an indicator of fewer sales. The debt management ratios reveal that debt is on the rise compared to prior years and is just above the normal industry standards. Crazy A’s long term debt to total capitalization ratio is alarmingly increasing and much higher than the average industry standard. This implies that this company may be riskier than that of others in the industry. Demonstrating more debts than capital could be a future indicator of future financial disaster. Their times interest earned ratio and fixed charge coverage is lower than the standard industry average and has been on a steady decline, which is also an indication of difficulties.

Rose Dickens Acct 2090-901 Crazy A’s profitability is under the industry standard and appears to be steadily weakening each year. Although the gross profit margin has declined in the past three years and is beneath the industry standard, the operating profit margin is on a steady incline and above the standard for the industry. The fact that the operating profit margin in increasing is an indication that Crazy A’s operating expenses are under control. The net profit margin ratio was within the industry standard in 2008, but has shown a significant drop. The cash flow margin, which is a key indicator of Crazy A’s performance, is alarmingly below the industry standard. Their return on investment ratio has also declined over the past three years along with the return on equity; both are below the industry standard. Having to rely on cash reserves or take on further debt may not be beneficial to the survival of Crazy A’s since they obviously have the inability to pay their short term debts. It does appear that they have managed to utilize their debts more successfully for the past two years compared to 2007. With consistent control of operating expenses, increasing sales and reducing the average collection period, Crazy A’s future ratios could be within the Industry standard.