Financial Ratios

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by comparing cost of goods sold with average inventory for a period. This measures how many times average inventory is "turned" or sold during a period.

The inventory turnover ratio "measures the number of times on average the inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period" (Kimmel et al, 2007, p. 292). This indicates how quickly a company sells its goods and a high ratio "suggests that management is reducing the amount of inventory on hand, relative to sales" (Kimmel et al, 2007, p. 287).

The Current Ratio is used to identify whether or not a company can pay its current obligations.

Working capital is the money that a company has after paying off its current liabilities and with which it can finance its operating and working capital requirements. The higher a number the better a company is able to pay off its debt and have cash for meeting its financial obligations. The current ratio is used to gauge a company 's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. The current ratio denotes the efficiency of a company 's operating cycle or its ability to turn its products into cash, which is a key requirement for business success. Quick ratio is an indicator of a company 's short-term liquidity. The quick ratio measures a company 's ability to meet its short-term obligations with its most liquid assets, essentially cash and cash equivalents. The higher the quick ratio, the better the financial position of the company in terms of its ability to meet its liabilities.

Current Ratio: Current ratio helps the company assess its ability to use assets like cash, accounts receivable, inventory and the ability to pay short term liabilities as the accounts payable and wages. The ratio can be found by dividing the current assets /the current liabilities. Year 12 shows a ratio of 1.78 with year 11 a ratio of 1.86. Year 12 is down from year 11. The industry is 2.1 so year 12 has declined from the previous year and is near the lower quartile which means there is a weakness. There is a showing of declining trending.

The current ratio shows the level to which the rights of short-term creditors are covered by assets that are expected to be changed to cash in a period consistent to the maturity of the liabilities.

Liquidity ratio lets us know whether the company is able to pay their short-term and long-term obligations. It measures how well the company can raise cash or convert assets into cash. Companies like to use this ratio to compare it against its competitors or industry average. Liquidity ratios include current ratio, quick ratio, and working capital.

Financial ratios play a key role in determining how a company is doing financially either for the good or the bad. Financial Ratios can be used internally or externally to determine how financially stable a company is. For this assignment we will use three common ratios to determine how financially stable and how Under Armour is over the last three years.

Current ratio is type of liquidity ratio. It is a financial tool used to measure a company’s ability to pay off its short-term debts with its short-term assets. A company’s current ratio is expressed by dividing its current assets by its current liabilities. A higher current ratio means the company is more capable of paying off its debts. If the current ratio is under one, this suggests the company is unable to pay off its obligations if they were due at that point (Investopedia, 2013). Companies that have trouble collecting money for its receivables or have long inventory turnovers can run into liquidity problems because they are unable to lessen their obligations.

The company’s current assets are just over two times its current liabilities, giving it a current ratio of 2.08. This is a sign of financial strength. The Quick ratio (current assets-inventory then divided by current liabilities) is 0.96. This measures the company’s ability to come up with cash in a matter of hours to days. It has working capital (current assets-current liabilities) of $7,508,998. With a working capital per dollar of sales of 15%. This is adequate given the high inventory turn.

Liquidity is a financial term used to determine the ability of a company to pay off its short-term debts, which will be due within the next year or in an operating cycle. In another word, liquidity is a very important indicator to evaluate a company’s financial health. Liquidity ratio shows a comparison between the most liquid assets and short-term obligations of a company. A higher liquidity expresses that the company has not only a better ability to pay off its short-term debts but also a greater amount of cash for an unexpected needs. In another word, when a company has a low liquidity, the company may face a risk to pay its short-term debt and struggle to fund its long-term operation. The current ratio is one of the most common and useful terms used to measure the liquidity of a company. It suggests the capability of a company to pay back its liabilities with its assets. The current ratio is computed by dividing current assets by current liabilities. According to a financial

Current ratio is a liquidity ratio that measures a business’s ability to pay short term liabilities with their current assets. The formula for current ratio is : Current Assets / current liabilities

Liquidity ratios measure the ability of a firm to meet its short-term obligations. A company that is not able

Current Ratio is the measure of short-term liquidity. It indicates that the ability of an entity to meet its

The current ratio lets one know what is exactly happening in the business at the present time. The current ratio is defined as current assets such as accounts receivables, inventories any type of work in progress or cash that are divided by the business current liabilities. Business liabilities can consist of many things such as insurance on building, employee insurance these liabilities way heavy on any type of business especially one that is large as Landry’s Restaurant.