Ratio Analysis to Determine Corporate Health Essay

One must consider umteen factors before deciding whether or not to practice in a telephoner. The fol blueing is an analysis and simile of the health of two well known companies, Exxon and Wal-Mart. whatsoever of the factors that were analyzed include incumbent ration, fund perturbation, accounts due turnover, and years gross revenue in store. Most of the de depotine used for the calculations were obtained from Yahoo Finance. Current ratio evaluates a companys ability to pay its short-term obligations (Wild, 2008). Exxons current ratio of 1. indicates that it should not fork up any issues paying its short-term obligations.In contrast, Wal-Marts current ratio of 0. 88, indicates that the companys current liabilities exceed current assets and thus investors should be obscure of its ability to pay short-term obligations. Inventory turnover is an other(a) indicator of a companys ability to pay short-term debt. Specifically, it is the number of propagation a companys average stock is sold during a period (Wild, 2008). Wal-Marts stock-take turnover of 9. indicates that it may be holding more than inventory than it needs, and thus it may be utilize its assets in efficiently. Exxons inventory turnover of 28. 31 is more preferable, as long as inventory adequately meets demand (Wild, 2008).These numbers show that Wal-Mart may be having difficulties paying its short-term debt and thus charge should be warranted. Accounts receivable turnover measure the select and liquidity of accounts receivable. Thus it indicates how often receivable be received and collected during the period (Wild, 2008). Exxons accounts receivable turnover is 15. while Walmarts is 107. 3. Exxons low turnover suggests prudence should consider stricter realization name and more aggressive collection efforts to avoid its resources organism tied up in accounts receivables. On the other hand, Wal-Marts high turnover implies the opposite management should consider using more liberal credit terms. sequence accounts receivable turnover measures the liquidity of accounts receivables, days sales in inventory is useful in evaluating liquidity of inventory (Wild, 2008). Exxons days sales in inventory is 13. 2 and Wal-Marts is 38. Exxons lower days sales in inventory value indicates that the company uses its resources more efficiently. Conclusion wholly things considered, Exxon appears to be a more solid company in which a first time stock-buyer should invest. While both are major companies, which appear to ingest solid numbers, Exxon seems to be the more stable and original company. Specifically Exxon seems to manage its assets better and seems more credibly to be able to pay its short term debt. Nonetheless, one should invest in stock that he or she feels better represents his or her goals.