Memo To | CEO, Company G | From: | Chelsea R Schulz | | | Date: | November 28, 2014 | Re: | Company G Financial Analysis | | |

After reviewing the income statements for years 2012 and 2011 for Company G, I have compared the pertinent industry data alongside these statements to interpret the company’s current financial condition. Please review the information below:

1. Current Ratio: Company G’s current ratio is 1.79, this is determined by dividing the company’s current assets by its current liabilities to measure its ability to pay short-term liabilities. The company’s current ratio is considered a weakness as it falls in the low end ratio of the given industry data for comparable companies during this quartile which is 0.6.

2. Acid-Test Ratio: The Company’s acid-test ratio was calculated and resulted in a ratio of 0.43, which is a significant decrease from 2011’s ratio of 0.64. This ratio is a weakness for company G as the ratio of 0.43 falls below the low end ratio of the given industry data from comparable companies during this quartile. The acid-test ratio is calculated by adding the company’s cash, plus, short term investments and net current receivables and dividing the result by the company’s total current liabilities.
This ratio shows if a company and pay all of its current liabilities if they were to come due immediately. Since the ratio of Company G is below 1, this is considered a weakness for the company and the management team should strive to bring this number above 1.00 to strengthen this area of the company’s finances.

3. Inventory Turnover: Company G’s inventory turnover was determined to be 5.17, this ratio would be considered a weakness for the company as it falls in the below the low end of given industry quartile data quartile. The inventory turnover ratio determines the number of times a company sells its