Del Campo Foods – Financial Ratio AnalysisFebruary 14, 2012To: Jennifer WashburnSubject: Financial Ratio AnalysisI have conducted the financial ratios of Del Campo Foods by using your financial statements and industry benchmarks. The years that have been analyzed are 2010, 2011, and 2012E. The first ratios will examine the liquidity of Del Campo Foods. The current ratio of assets to liabilities for 2010, 2011, and 2012 are 2.33X, 1.17X, and 2.34X respectively. In the years 2010 and the estimate for 2012E, the current ratio is good because for every dollar that the company owes, it has $2 in assets. In 2010, the current liabilities were very high causing a low current ratio. The current ratio for the industry average is slightly higher than 2010 and 2012 at 2.7X. An acid test was also performed for all three years, and 2011 struggled greatly due the high current liabilities. Even in the years of 2010 and 2012E the acid test ratio was only at about .85 which means that Del Campo Foods cannot pay their current liabilities and should be looked at with caution.
The next ratios analyze asset management using turnover ratios. The inventory turnover ratios were steady across all three years, but they are still about under the industry average by about 2X. A low turnover ratio implies poor sales and higher inventories. The total asset turnover was decent for all three years and just barely under the industry average. The debt ratio is one way to analyze Del Campos Foods debt management. For the years 2010, 2011, 2012E the debt ratio is 55%, 83%, and 44% respectively. The industry average debt ratio is at 50%, so the only year that Del Campos debt was high was in 2011. This means that the company is unable to meet its financial obligations. For the projected year of 2012, Del Campo has low debt compared to their total assets indicating that the companys level
5. A typical year of debt for a companys group of investors is about $18 billion. Since this ratio is low it is important to note the current market conditions and other factors that lead to low debt growth.
3A.3. Capital Markets and Money Market: A Comparison Between Market and Country
According to a recent financial report and an analysis in the Financial Times, financial services industry revenues doubled at an annual rate of 6.8% from 2006 to 2014. However, market-adjusted revenues were higher in 2014 at only $23.7 billion compared to 2013, rising to $21.5 billion. A country’s financial sector revenues were about $22.8 billion last year, which shows that when you combine market share in a country with a profit-driven private sector, you can see a similar increase during the third quarter. If you look to the next four quarters to see what trends are taking place, the year-to-year trend towards declining public sector private sector employment and an upward trend to lower public sector debt growth is particularly noticeable.
3A.3.1. Currency Prices: Borrowings and Other Spending
While the government, businesses and the media are not talking about their fiscal deficits, they are talking about their budgetary expenditures and their deficits. It may be surprising to others who have studied this situation, but it is clear from the U.S. government’s record which are responsible for the current economic condition of the United States.
Financial Services Sector: A Long Term Perspective
The chart below shows this type of government spending per head, shown in the upper right hand corner of the table. In all other countries spending as much by dollar as is made in any country from the United States with the rest of the world’s countries paying more. With some exceptions, the United States has not taken the opposite approach to fiscal austerity.
3A.3.2. Debt: A Long-Term Perspective
As recently as 1995, the Federal Reserve was a member of the Monetary Policy Committee of the Federal Reserve System and was responsible for the monetary policy of our society’s economies. During 1995, the central bank of the United States was the No. 2 Federal Bank. In 1994, in a bid to make sure that the private interest rate policy of the current Federal Reserve System continued to meet its intended aim of providing financial parity, the Fed raised its central bank interest rates by 1.5 percent. The Fed kept those rates. In a typical financial market, such as the United States, a rise in interest rates is accompanied by a decrease in cash flow. Thus, the Fed’s principal interest rates are not necessarily the primary driver of the financial resources that comprise the financial system in the United States (i.e. the economy itself). The interest rates are largely the consequence of the monetary policy of the previous government.
The Fed in an era of high inflation, is a fiscal engine. The Federal Reserve’s monetary policy proceeds by raising interest rates in an effort to provide more consistent financial returns. As of now, this fiscal policy, although in principle effective, is subject to several risks.
Since inflation has been falling to the lowest level in many decades, the overall economic growth of the United States has been falling rapidly since the beginning of the last decade. More than half of all the economic activity that occurred in fiscal 2007 was conducted in the United States in fiscal 2011. Therefore, the fiscal year spending of the federal government was a little over 5 percent of GDP from fiscal 2010. Even with growth in spending, the economic expansion in fiscal 2011 declined from 7.0 percent of growth in 2009 to 4.0 percent of growth in 2010. Fiscal 2013 grew from 1.2 percent to 1.6 percent of growth in FY 2013. Federal spending, a result of the increase in fiscal stimulus, reached a target of 1.9 percent, but that has declined gradually to just under 1.0 percent in fiscal 2013. This trend shows no sign of slowing down.
Despite the challenges of the year 2012, the Federal Reserve is working to ensure that rates are appropriate to meet the growth aspirations and expectations of members of the economy. Although the Federal Reserve’s monetary policy has been very effective in reducing unemployment, a large portion of the cost of maintaining the banking system is spent on additional inflation. Although unemployment has been falling sharply for almost a year, economic growth is still not sustainable because of higher spending.
At the time of the recent fiscal election, the Federal Reserve’s rate of interest was at zero. However, since then, the rate has increased significantly, from zero in October to 5.0 percent of GDP in June 2012. In response, the Federal Reserve has continued to encourage credit growth through increased loan guarantee programs, greater efficiency in the mortgage lending industry, and a new lending strategy of less lending of large mortgages. This expansion of credit, however, has slowed and has led to increased loan default rates. The Federal Reserve may experience a slowdown in lending growth as both borrowers and lenders have been able to obtain more capital to meet their obligations.
The Fed’s efforts to stimulate economic growth under the current financial system have led to a number of changes in economic policy. First, the Federal Reserve has tightened the rules governing credit default swaps. In December 2008, the Federal Reserve made a decision that increased the number of U.S. government securities (including mortgage-backed securities, mortgage-backed bonds and government-sponsored corporations) that were insured. The Federal Reserve held the swaps for the benefit of holders of government bonds and government-issued securities. In December 2010, the Fed made an adjustment to the standard repo policy to allow repo holders to own securities they could redeem only at the rate of 1% and limit the number of times they could redeem their securities. This decision was implemented in November 2011. Over the past several years, the Federal Reserve has also increased the number of mortgages owned by Treasury securities. The most recent increase went into effect on December 6, 2015. These adjustments are expected to spur investment in private, non-public, and government-sponsored bonds, and to increase the liquidity of the banking system. These decisions have had an economic impact on the economy through to mid- to mid-2013. Furthermore, during the downturn, the Federal Reserve has increased loan-to-value ratios in all banking facilities, such as Federal Open Market Committee, the Federal Open Market Committee (FOMC), the Commodity Futures Trading Commission, the Small Business Administration (SBA), and the Federal Deposit Insurance Corporation. This increase in liquidity enables investors and the Bank of the United States to
Interest rates in the United States remain largely constant throughout the economic cycle. During the Great Depression, during the Great Recession, at the beginning of the 20th century, interest rates stood at around 17.5% or 935 basis points at which they were the lowest possible yield. After 2001 recession that