Financial Ratio Analysis Report - Baldwin Team Performance

This report provides a financial ratio analysis of the Baldwin team's performance. It covers various financial ratios, including liquidity ratios (current ratio, quick ratio), leverage ratios (debt to total asset, debt to equity, long-term debt to equity, and times interest earned), activity ratios (inventory turnover), and profitability ratios (net profit margin, return on sales, return on assets, return on equity, earnings per share, and price-to-earnings ratio). The analysis includes calculations and interpretations of these ratios, comparing Baldwin's performance against competitors and highlighting its strengths and weaknesses. The report discusses the implications of these ratios on the company's financial health and provides insights into its efficiency, profitability, and ability to meet its obligations. The report uses data from the attached spreadsheet to calculate the ratios and draws conclusions based on the calculated values and industry benchmarks.

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FINANCIAL RATIOS
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Discussion One
Financial ratios are used measuring performance of various financial measures that
indicate the financial health of a firm.
Liquidity Ratios
These are monetary ratios used to measure the capacity of a company to pay liabilities. It
is mostly used form of liquidity ratio (Corporate Finance Institute, 2019).
Power Ratios
These measure the aptitude of a business to meet its long tenure liabilities. The debt ratio
expresses the company’s total liabilities in percentage form against its assets (Corporate Finance
Institute, 2019). Debt to equity expresses the percentage of the company’s finances that comes
from creditors and investors
Activity Ratios
This measures the efficiency of management in using its assets in the manufacturing
process, making ales and collection of cash (Investopedia, 2016). An inventory turnover ratio
explains the efficiency of a firm in managing inventory and also in the generation of sales.
Profitability Ratios
These are ratios used in the measurement of firms’ efficiency in the generation of ratios.
Operating profit brim measures the proportion ate turnover a company produces from its
operations. The net profit margin expresses the proportionate profits a company gets from its
revenue gained (Corporate Finance Institute, 2019). The return on sale on evaluates the

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operational efficiency of a firm. It shows how much return is made per dollar sale. Return on
assets measures the amount of profit generated by each dollar of assets. Return on equity on the
other hand evaluates the aptitude of a business to engender profits from its stockholders reserves
in the business (Investopedia, 2016).
Discussion 2
From the current ratio shown in the calculation, Baldwin can pay its current liabilities
from its current assets 2.92 times over (Corporate Finance Institute, 2019). This is good in the
maintenance of liquidity ratio.
Leverage Ratio
Baldwin leverage ratio is 41.59%.this percentage is good because the company is able to
satisfy is liabilities with the assets. Baldwin debt to equity ratio is 80% and this is favorable
because it shows that the firm is using creditor financing more than investor financing. Debt to
equity ratio for Baldwin Is 71% and it shows that the firm is not possibly going to face any
difficulties in payment of interests any time in the near future (Corporate Finance Institute,
2019). Time interests’ ratio shows that Baldwin has a time interest’s ratio of 2.51 meaning that
its income is 2.51 times higher than that of its interest expense.
Activity Ratios
Inventory turnover ratio for Baldwin is 1.11 times that of competitors. This shows the
efficiency of the firm in generating sales from investments. The firm’s net profit margin is 4.48%
and is a clear indicator that the firm is effectively controlling its costs. The ROS for Baldwin is 5
% shown as a measure of operational efficiency (Corporate Finance Institute, 2019). ROA for

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Baldwin is 5% meaning that Baldwin is highly profitable and efficient. ROE for Baldwin
stands at 9.5 % meaning that Baldwin is highly effective in using fund operations. EPS for
Baldwin stands at $ 2.70 meaning that is has a superior financial strength (Corporate Finance
Institute, 2019). The P/E for the firm stands at 15.8 times meaning that the firm can improve on
this since it is relatively low.

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References
Corporate Finance Institute. (2019, March 6th). Financial Ratios:The use of financial figures to
gain significant information about a company. Retrieved June 20th, 2019, from
Corporate Finance Institute:
https://corporatefinanceinstitute.com/resources/knowledge/finance/financial-ratios/
Investopedia. (2016, April 16th). Return on Sales (ROS) Definition. Retrieved june 20th, 2019,
from Investopedia: https://www.investopedia.com/terms/r/ros.asp