Ratio Analysis and Interpretation for Frank's Barbeque

This assignment provides a comprehensive ratio analysis of Frank's All-American Barbeque, based on projected financial statements. The analysis includes the calculation and interpretation of key financial ratios such as gross profit margin, net profit margin, current ratio, quick ratio, debt-to-equity ratio, and asset-to-equity ratio over a five-year period. The analysis reveals trends in profitability, liquidity, and solvency, highlighting the company's financial health and potential for growth. The report concludes with an assessment of the company's financial position, emphasizing the importance of efficient capital and operational management for continued success. This analysis is designed to help investors and stakeholders make informed decisions about the business. The assignment follows the guidelines of a small business management course.

Running head: RATIO ANALYSIS
Ratio Analysis
Name of the Student:
Name of the University:
Author’s Note:

1RATIO ANALYSIS
Table of Contents
Ratio Analysis of Frank’s All-American BarBeQue:......................................................................2
Interpretation of Ratios:...................................................................................................................3
Bibliography:...................................................................................................................................4

2RATIO ANALYSIS
Ratio Analysis of Frank’s All-American BarBeQue:
Interpretation of Ratios:
Ratios as a means of financial statement analysis, helps in interpreting and understanding
the financial performance and financial position of an organization. Investors and various
stakeholders can make their decisions rationally based on certain ratios. From the above

3RATIO ANALYSIS
computations and analysis, it can be stated that the gross profit margin is having a slightly
increasing trend. It has increased marginally from 47.14% to 47.81% over the projected five year
period. Net profit margin is having a growth and a good increasing trend due to efficient
management and decrease in operating expenses. It has increased from 31.02% to 41.09% over
the five years. They are having a strong current ratio in the initial years and as they have
projected a high cash generation, it resulted into a high current ratio in the following years. Their
quick ratio follows the same trend as the current ratio and implies a good short-term liquidity of
the company. They are having both the current and quick ratios above the standard of 2:1 and
1:1.
They are projecting a small amount of their capital to be financed by the debt and it
resulted into a very low debt to equity ratio over the projected five years period. Their most of
the assets are backed by the equity capital and less amount of debt capital, and hence it resulted
into favorable assets to equity ratio. Lastly, it can be concluded from all those ratios that there is
a good growth and profitability opportunity to the company, which can be explored through
efficient capital and operational management.

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Bibliography:
Easton, M. and Sommers, Z., 2018. Financial Statement Analysis & Valuation, 5e.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.