Business Decisions Using Financial Ratios Assignment Help
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Jose Sanchez owns and operates Western Gear, a small merchandiser in outdoor recreational equipment. You are hired to review the three most recent years of operations for Western Gear.
g. Is the company using its assets efficiently?
g) Efficiency ratio is one measure which ensures that the assets of the company are being utilized in correct manner which measures the level through the sales effectiveness. The level is computed with a level where the higher ratio leads to a perspective where low utilization of sales makes a maximum output of the resources utilization.
Ratio clearly states that the assets efficiency has gradually reduced in last three years as though the level is decreasing gradually still the results is negative in nature. Considering the element of the Assets Turnover in three years analysis the turnover efficiency has reduced by a level of 13.33 percent. Thus, showing clearly that the assets level is decreases in connect with the sales utilization
h. Did the dollar amount of selling expenses decrease during the three-year period?
(h) The selling expense ratio is one measure which ensures that how are the sales of the company being utilized especially in terms with the expenses elements. The specific selling expenses ensures that the selling expense which being the commission and other related expenditure are properly ensured and effectively utilized in connection with the sales maintained by the organisation. As a matter of fact high ratio is considered as an alarming element as more expense is required to manage a given level of the sales meaning more expenditure. On the other hand, lower level of ratio means a low level of expenses are required to measure same level of sales. Hence, low selling ratio is much more advantageous then the higher-level ratio as it shows a profitable ratio.
Ratio clearly states that the selling expense efficiency has gradually increased in last three years as the level of decreasing results show that the expenditure required to manage the given level of sales as eventually decreased thus, proving that the dollar amount of expenditure on the selling expenses is decreasing and the profitability element is increasing.
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