Business Administration 1220E Lecture Notes - Lecture 8: Accounts Payable

• School: Western University
• Department: Business Administration
• Course: Business Administration 1220E
• Professor: All

Document Summary

Increasing, and extremely high selling and administrative expense. Extreme increase of interest expense (took out large loans?) Severe decreases in general profitability of the company. Age of ar < age of ap is good sign. Extremely large age of inventory = must compare to industry. Current ratio drastically increased not enough use of assets. Compared to acid test, highly inefficient and stagnant assets. Drop in net worth to assets means high increase in liability. Still can pay off interest, but nearing limits to amount of liabilities: efficiency standards, liquidity (inventory, stability possible, growth. Nice growth of sales but huge drop of profit. Balance sheet/statement of earnings analysis: ridiculously large selling and administrative expenses, huge increase in interest expense, increasing inventory but it is not selling, subsidiary investment, paid off capital loans and accounts payables, remained profitable. Conclusion: financially healthy slow seasonal report of the balance sheet. Shows high inventory and low sales/accounts receivable.