Tools for Decision Making

Tools for Decision Making

NETFLIX

NETFLIX

Current Assets

$1830857000

Current Liabilities

$1225055000

Current Ratio

1.494510042

The Netflix has a current ratio of 1.49 times. This means that company is in excellent position to pay of its complete liabilities in the year 2011 and still left with one third of the cash available assuming that all the current assets are convertible to cash before paying current liabilities (Netflix, 2012). The most recent quarter reports on Reuters provide the current ratio of 1.39 and industrial average of 1.37. If we assume that industrial average was same in previous year then NETFLIX is almost at par with industrial level (Reuters, (1), 2012). This means that Netflix is actively maintaining the current stocks and not leaving any asset in idle condition. The company is in good shape if we use the current ratio measure to assess the health of the company because it has the cash to meet up with its current liabilities.

Investment Activities

Netflix invested $446,784,000 in investing activities. The companies' noncurrent asset base grew by $3,123,833,900 which shows heavy investment in fixed assets and other long-term assets (Netflix, 2012).

Operating Activities

The cash generated by operations compared from 2009 has a cyclical trend. In 2009 it was $325,063,000 which declined to $276,401,000 in 2010 and then increased to $317,712,000 in 2011. The overall trend shows decline in cash generated from operational activities though it increased in 2011 but couldn't reach to the level of 2009. The Net Income on the other hand increased during the three years. In 2009 it was $115,860,000 increased to $160,853,000 in 2010 and then made a jump to $226,126,000 in 2011. Net income trend was overall growing. The fall in operational activities is due to $2,320,732,000 of additions to the streaming content (Netflix, 2012).

Spartan Motors

SPARTAN MOTORS

Current Assets

$149069000

Current Liabilities

$50396000

Current Ratio

2.957953012

The current Ratio of Spartan Motors is 2.95 times. This means company can pay almost thrice the amount of current liabilities from the current assets, assuming the current assets converts to cash. Referring to the figure, company has a lot of inventories tied up with the current assets. This means idle cash is tied up in the inventory and can be invested in any other profitable venture for the Spartan Motors (Spartan Motors, 2012). The industry average for current ratio of the most recent quarter is 1.41. Assuming the same industry average in 2011 Spartan Motors is far ahead of the industry averages (Reuters, (2), 2012). Spartan Motors had 44% of its cash tied up in inventories which means idle cash not being utilized properly.

Investment Activities

There was a major investment outflow in 2009 $47,797,000 which includes business acquisition of $42,318,000. In 2010 positive cash flows are generated from investing activities. In 2011 negative outflow depicted increase in investments by purchasing businesses and fixed assets worth $10,001,000. However the no current assets are showing a decline in fixed investment assets. Overall Spartan Motors are growing by heavily investing in property and purchasing businesses (Spartan Motors, 2012).

Operating Activities

The net income of the company is drastically falling in the ...