Financial Statement and Ratio Analysis Term Paper

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Borders Group

Day's Sales in Inventory

Inventory Turnover

Working Capital

Current Ratio

Cash Ratio

Sales/WC

OCF/current maturities

Borders Group

Debt Ratio

OCF/Total Debt

Borders Group

Net Margin

ROA

ROE

Gross Margin

ROA and ROE are n/a because there were no returns, as the company recorded a net loss for the year.

Borders Group

EPS

OCF/Cash Dividends

The results above illustrate that Borders has not had a good couple of years. The company is losing money, and this is reflected in the loss per share, and the lack of returns on assets and equity. The gross margin seems adequate to deliver profit, but it has decreased in the past year. The net margin, however, has been negative in both years, because the company has posted losses Borders has a lot of debt, with a high debt ratio, and low operating cash flow to debt ratio. While its immediately liquidity is not an issue in terms of its current ratio, a major point of concern for the company is how little cash it has. Borders has a low cash ratio, and a lot of inventory on the books. The inventory turnover is not particularly good for a company that may face a cash crunch at some point in the near future.

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So while Borders is not in immediate jeopardy, the company is not performing well and in terms of its liquidity does not appear to have much margin for error.

f. The company's income was reasonably steady for 2007 and 2008, but dropped in 2009. This is not surprising -- most companies saw revenue declines in 2009, as this was the depth of the recession. However, Borders was not in a great financial position in 2007, so the decline in revenue in 2009 has only put it more at risk.

g. Despite the revenue problems, Borders is generating more cash from operations over the past couple of years, in part because it has worked to lower its inventory levels, and lower its payables. The company has taken other steps to ensure its financial health -- lowering capital expenditures, selling off surplus assets and paying down its debts. All of these steps serve to improve the cash position of the company in the face of declining revenues.

h. The company has little margin for error despite its moves. The ROA is a deceptive measure and should not be used here --….....

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