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Financial Analysis - Liquidity Position

You have taken the following information from a firm's financial statements. As an investor in the firm's debt instruments, you are concerned with its liquidity position and its use of financial leverage. What conclusions can you draw from this information?

2004 2003 2002
Sales $1,700,000 $1,500,000 1,000,000
Cash 18,000 7,000 5,000
A/R 152,000 130,000 1 25,000
Inventory 200,000 190,000 200,000
Current liabilities
225,000
210,000 175,000
Operating income 170,000 145,000 90,000
Interest expense 27,000 23,000 20,000
Tax 53,000 45,000 25,000
Net income 90,000 77,000 45,000
Debt
260,000
250,000
200,000
Equity 330,000 300,000 200,000

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You have taken the following information from a firm's financial statements. As an investor in the firm's debt instruments, you are concerned with its liquidity position and its use of financial leverage. What conclusions can you draw from this information?

2004 2003 2002
Sales $1,700,000 $1,500,000 1,000,000
Cash 18,000 7,000 5,000
A/R 152,000 130,000 1 25,000
Inventory 200,000 190,000 200,000
Current liabilities
225,000
210,000 175,000
Operating income 170,000 145,000 90,000
Interest expense 27,000 23,000 20,000
Tax 53,000 45,000 25,000
Net income 90,000 77,000 45,000
Debt
...

Solution Summary

This solution is comprised of a detailed explanation and calculation to find the firm's liquidity position and its use of financial leverage to make conclusion on the firm's financial position.

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