California Choppers Case Study Solution
Ratios Analysis
The ratios of the company are also calculated for five years. These ratios include: profitability ratios, assets management ratios, long-term debt paying, and liquidity ratios. The profitability of the company is better in 2002 and 2003, but is not as better in 2004 and 2005. The turnover ratios are good but fixed and total assets turnovers are not good. ROE for California Choppers for five years shows that the return is not good. This means that in allthese years; the company is earning profit and revenue for its shareholder’s investment, but with a lower percentage. The liquidity ratios of the company are not very good but the company’s current assets are available for retiring its liabilities. The ratios of the company and the industry can also be compared to find the position of the company in the industry. The liquidity ratio of the company is better as compared to the industry, as the company’s current ratio and cash ratio are 1.37 and 0.19 respectively, but the industry’s current ratio and cash ratio are 1.25 and 0.27 respectively.Assets management ratios are also exhibiting good performance in the industry. Debt ratios of the company are good, but the times interest earned ratios are not matching with the industry’s ratio. The profitability ratios of the company are below from the industry average as the gross profit margin, operating profit margin, net profit margin, ROA, and ROE all are below than the industry averages.
Recommendations
The company should analyze the improvement for the development and cost-cutting, which would increase the revenues and the company can achieve the goals. The company needs to work on the growth of revenue through promotional activities. The management should also go with the purchases of new production equipment, which would produce effectively and efficiently. The improvement of the company can also be possible with Research and Development. The company can invest from its external resources. As the profit will increase; it will not just increase the returns of the shareholders but would also increase the current financial performance of the company.......................................
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