Betsen Financial Statetement Analysis Assignment Key_1

Betsen Financial Statetement Analysis Assignment Key_1 -...

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Part 2. Based on the financial ratios that you have prepared for years 2006 & 2007 and the Industry ratios given: Identify at least two areas (ie Liquidity, Leverage, Profitability, Efficiently, or Market Value) of potential concern using the ratios and explain why they are of concern. Leverage is higher than the industry norm. However, although Betsen has improved (lowered) these leverage ratios with respect to 2006 , they are still above the industry norm. If this downward trend continues, Betsen’s 2008 leverage ratios will likely be close to the industry levels. Profitability ratios, while generally higher than the industry ratios in 2006, they have significantly dropped in 2007 and to well below the industry average. If Betsen’s profitability ratios continue to decline in 2008, they will be at risk of losing competitiveness in the apparel market. Betsen’s ROE decreased significantly from 2006 to 2007. While in 2006 the ROE was above the industry norm, it declined by 39% and it is about 26% less than what the average apparel company (Industry avg) is returning to their shareholders. Betsen needs to improve this ROE ratio if they don’t want their shareholders to take drastic measures with the management team. Identify at lease two areas (ie Liquidity, Leverage, Profitability, Efficiency, or Market Value) that have shown improvement and explain why. Betsen's liquidity ratios are improving and are slightly better than the industry norm. By looking at the firm’s liquidity improvement from 2006 to 2007, we could assume that this upward trend will cause the 2008 liquidity ratios rise a little bit more. All efficiency ratios are poor, but Betsen seems to be putting effort into controlling these problems as evidenced by improvements over 2006 ratios. All of the market value ratios have shown a significant improvement from 2006 and
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Betsen Financial Statetement Analysis Assignment Key_1 -...

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