memo to your superior analyzing the performance of SAC

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The response addresses the queries posted in 2175 words with references.

//As per the directions, we will analyze the performance of SAC by calculating and commenting on the various financial ratios. In this part, we will also talk about various other tools & methods that could be applied to study the Company's financial performance. So, first of all, we will write about the general introduction on the financial ratios under the heading of introduction, for example: //

Memorandum

To: Superior

From: Financial Analyst

Date: April 13, 2009

Subject: Analyzing the performance of SAC

Introduction:

Financial ratios are well known and most widely used tools of Financial Analysis. This mainly represents the mathematical state between one items of balance sheet to another or two values on the financial statements, during the specified period of time. In order terms, it is ratio of chosen values on the financial statements of the company. The analysis of the ratio can disclose relationship, as well as, the basis of comparison that substantially reflects conditions and trends that are to be observed by going through individual components of the ratio.

The usefulness of ratios ultimately depends on their intelligent and skillful interpretation. This analysis primarily assists in evaluating the companies in valued terms. It is applied to understand the financial statements, which find out the company's intensities and vulnerabilities and also its financial performance related to the historical period and current period (Siegel, Shim, & Hartman, 1997).

Ratio analysis is not only useful for the company, but also serves the various stakeholders such as managers, creditors & lenders, Government, stockholders, banks, etc. in taking on wise or critical decisions. Besides this, ratio analysis also renders some specific advantages to the company that enables management or superiors to effectively plan, forecast, control, intercommunicate, etc. This analysis also prospects on the management's level of efficiency and usage of assets.

With the help of this analysis, interested stakeholders can easily make scrutiny among two or more than two companies in the same or different industry; and also values of the dissimilar periods of time (i.e. financial years like 2005 & 2006) for one company or between single companies. The ratios that are grouped as per different objectives and interests are as given: Liquidity ratios, profitability ratios, capital structure ratios, efficiency ratios and market ratios.

Interpretation of ratios is also another vital aspect of this analysis. This involves a company's progress, present position and its future prospectus. Interpretation requires the comparison of ratios with some standards or past ratios of the business organization. It mainly requires general information and prediction (Siegel, Shim, & Hartman, 1997).

//Above, we talked about the financial ratios and its various types, now proceeding to the next part of guidelines, we will calculate and discuss the following ratios for SAC. In this part, we will also discuss the comparison of the ratios over the period i.e. 2005-06, in order to analyze its performance.//

Analysis of the Financial Ratios:

Ratio Analysis has come forth as the value technique of analysis of the basic financial statements. In order to critically analyze the SAC performance for the year 2005 and 2006, the calculation and analysis of some important ratios is very essential and useful practice. The following are the ratios included in this analysis: Current, Debt to equity, Inventory turnover, Account receivable turnover and Gross margin ...