Project- Financial Analysis due at end of Week 6

Prepare a memo addressed to me on the following:

Voda Link Corp. is a manufacturer of communications components and accessories, with total assets of $10,000,000. Selected financial ratios for Voda Link and the industry averages for firms of similar size are presented below.

                                                2021     2022    2023                 Industry Average

Current ratio                             2.32      2.20      2.11                  2.22

Quick ratio                               1.16      1.15      1.25                  1.30

Inventory turnover                    2.90      3.72      3.80                  5.90

Net sales to stockholders’ 

equity                                       4.12      4.39      4.49                  4.30

Net income to stockholders’

 equity                                      0.24      0.26      0.30                  0.15

Total liabilities to 

stockholders’ equity                  1.31      1.27      1.39                  1.00

Voda Link is being reviewed by several entities whose interests vary, and the company’s financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Voda Link’s financial position.

  National Bank: The bank is processing Voda Link’s application for a new 5-year term note. National has been Voda Link’s banker for several years but must reevaluate the company’s financial position for each major transaction.

AT&B Company: AT&B is a new supplier to Voda Link and must decide on the appropriate credit terms to extend to the company. 

First Brokerage: A brokerage firm specializing in the stock of communication firms that are sold over-the-counter, First Brokerage must decide if it will include Voda Link in a new fund being established for sale to First Brokerage’s clients.

  Executive Committee: This is a committee of Voda Link’s management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company’s working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.

  Instructions

(a) For each of the four entities described above, identify two financial ratios that would be most valuable as a basis for its decision regarding Voda Link.

(b) Discuss what the financial ratios presented in the question reveal about Voda Link. Support your answer by citing specific ratio levels and trends as well as the interrelationships between these ratios.