Financial Statement Analysis: Adventure Sports Essay

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SAMPLE EXCERPT . . .
A look at the firm's operating profit also reveals an impressive trend -- the same has been on an upward trend during the period under consideration. This is an indication that Adventure Sports has enough cash for growth/expansion and other needs.

To determine whether the firm would be affected if the current profitability trends were to change, it would be prudent to analyze its ability to remain solvent both in the short-run and in the long-run. Of great utility in this case would be the company's liquidity ratios and financial leverage ratios. For purposes of this discussion, I will make use of the current ratio and the debt ratio.

Table 1: Debt Ratio and Current Ratio

Ratio

Computation

Values

Current Ratio

2009

2008

2009

2008

1,349/623

1,277/572

2.17

2.23

Debt Ratio

1,323/1,472

1,272/1,405

0.90

0.91

Analysis

Looking at the table above, it is clear that the company would encounter no challenges settling its obligations. This is particularly the case given that as the current ratio indicates, Adventure Sports has more assets than debt. The company is therefore not likely to encounter liquidity problems even if the trends in profitability were to change significantly (in the short-run).Buy full Download Microsoft Word File paper
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Essay on Financial Statement Analysis: Adventure Sports Assignment

On the other hand, the debt ratio in this case indicates that Adventure Sports has more assets than debt. This indicates low financial risk level. It is however important to note that volatile cash flows could affect Adventure Sports' ability to settle its obligations -- both in the long-run and in the…
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Financial Statement Analysis: Adventure Sports.  (2014, February 25).  Retrieved May 27, 2020, from https://www.essaytown.com/subjects/paper/financial-statement-analysis-adventure/3904752

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"Financial Statement Analysis: Adventure Sports."  Essaytown.com.  February 25, 2014.  Accessed May 27, 2020.
https://www.essaytown.com/subjects/paper/financial-statement-analysis-adventure/3904752.