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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...
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 -- it shows that the company is still losing money but the reality is that we are talking about cash. Operating cash flows are…
d. The decrease in inventories has been one of the means by which management has adapted to the declining revenue. It was significant in ensuring that the company had positive cash flow from operations in 2010, but its influence was arguably less than in 2009, when it was the most critical factor. Borders might be at the point of diminishing returns when it comes to using inventory liquidation as a means of delivering positive operating cash flow.
e. There is no question here. Rock on.
f. It's an audit report. They have a standardized format, and this report fits that format. Despite the date, the report can be taken entirely seriously -- E&Y really did audit this company's statements and they actually mean it when they say that they found the statements to accurately reflect the company's financial condition.
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