Kudler Fine Foods

Kudler Fine Foods



Kudler Fine Foods

Companies constantly evaluate their performance by comparing it with its industry competitors and with other successful businesses from other industries. To do that there are many ratios out there that makes the comparison much easier. Comparative ratio analysis helps to identify their company's strengths and weaknesses and evaluate its financial position.

Riordan Manufacturing and Kudler Fine Foods analysis will show comparison to its industry current ratio, debt ratio and profit margin.

Current ratios consists of current assets which is cash on had and current liabilities which is short financial obligations such as accounts payable and notes payable. Riordan current ratio is 2.09 and its industry ratios is 2.04. Its current ratio is above industry average which means that Riordan is able to meet short term obligations or satisfy short term creditors.

Debt ratio measures a firm's total assets that are financed with creditors' funds. It includes all short term liabilities and long term borrowings. Riordan debt ratio is 86%. The ratio is interpreted to mean that Riordan creditors are financing 86% of the firms' total asset. This is much higher than the 64.40% industry average. This indicated that Riordan is using more debt to finance operation than the average firm in the industry. The company may have difficulties obtaining financing for further asset additions. If Riordan wants to restore its borrowing capacity it should take steps to increase its equity base.

Profitability ratios measure how effectively firm is generating profits on sale, total assets and stockholders investment. This also demonstrates how well its management is making investments and financing decisions. It consists of gross profit margin and net profit margin. Riordan gross profit margin is 17%. It shows that Riordan margin is below its industry average of 21.94%. (www.investor.reuters.com) This is indicating that Riordan pricing policies or its production methods are not quite as effective as those of the average firm in the industry. Different Inventory accounting method used by Riordan and other firms can influence the cost of sales and gross profit.

Return on assets measures firms' net income to the total asset investments

The higher the ROA number, the better, because the company is earning more money on less investment. (www.investopedia.com) For Riordan return on asset is 6.00%, which is below its industry average of 7.15%. (www.investor.reuters.com)This shows that Riordan is not good at converting its investments into profit. Not may companies excel at making large profits ...