Bsa 500 Financial Ratio

University of Phoenix

BSA/500 Business Systems 1

Memo

To: Susan L. Speulda, MBA

Re: Week Five Individual - Financial Ratio - Riordan Manufacturing

Susan I have attempted to calculate the Current and Debt ratios, together with the Profit margin and the ROA for Riordan Manufacturing and compare them to Ball Corporation a manufacturer of metal and plastic packaging, for beverages, foods and household products.

Current Ratio

As you know, the Current Ratio is defined within the Understanding Financial Information and Accounting chapter (18), Nickels, W.G, McHugh, J.M and McHugh, S.M (2004) is defined as the ratio of Riordan Manufacturing's current assets to its current liabilities.

Current ratio = Current assets / Current liabilities

Over the period of 2004 through 2005 the company has shown a decrease of .34% in Current ratio from 2.43% (04) to 2.09% (05), which compares to a similar decrease for Ball Corp. from 125% (04) to 104% (05) a decrease of 21%

Debt Ratio

The GAAP has defined the Debt Ratio as the following.

Debt Ratio = Total Debt / Total Assets

Using the Total Liabilities as the Total Debt and using the Total Assets over the same two year period, Riordan Manufacturing's debt ratio is has remained rather stable with only a .2% increase from 35.9% (04) to 36.1% (05) which compares to a larger increase of 12% from 204% (04) to 216% (05) for the Ball Corp.

Profit Margin

The GAAP has defined the Profit Margin as the following.

Profit Margin = Net Income / Sales

Using the Net Profit After Taxes as the Net Income and using the Sales over the same two year period, Riordan Manufacturing's profit margin has remained rather stable with only a slight .5% decrease from 4.3% (04) to 3.8% (05) which seams to track the slight decrease of .9% using the Total Revenues, and Net Income, figures from the Income Statement for the Ball Corp. resulting in 5.4% (04) to 4.5% (05).

ROA