Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
The Altman Z score for Liberty Medical
Group is -0.11 that indicates the
company may have a relatively low
degree of protection against bankruptcy.
Altman Z score Manufacturing
(((Current Assets - Current Liabilities) / Total Assets) * 0.717) + ((Total Equity / Total Assets) * 0.847) +
((Earnings before Interest and Taxes / Total Assets) * 3.107) + ((Total Equity / Total Liabilities) * 0.42) +
((Sales / Total Assets) * 0.998)
This ratio represents a numerical ranking that predicts the potential for bankruptcy of a manufacturing
company. In general, the lower the score, the higher the odds of bankruptcy. Companies with Z-Scores
above 3 are considered to be healthy and therefore unlikely to enter bankruptcy.
The Altman Z score for Liberty Medical
Group is 6.91 that indicates the company
has a relatively high degree of protection
against bankruptcy.
Accounts Receivable to Working Capital
Trade Accounts Receivable / (Current Assets - Current Liabilities)
This ratio measures the dependency of working capital on the collection of receivables. A lower number
for this ratio is preferred, indicating that a company has a satisfactory level of working capital and
accounts receivable makes up an appropriate portion of current assets.
Financial Analysis CS: Sample Reports 47
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
The accounts receivable to working
capital ratio for Liberty Medical Group is
-0.67, which compared to the baseline
of -0.69 indicates the company's
performance may be insufficient in this
area.
Inventory to Working Capital
Inventory / (Current Assets - Current Liabilities)
This ratio measures the dependency of working capital on inventory. A lower number for this ratio is
preferred indicating that a company has a satisfactory level of working capital and inventory makes up a
reasonable portion of current assets.
The inventory to working capital ratio for
Liberty Medical Group is -0.06, which
compared to the baseline of -0.07
indicates this ratio may not be in line
with company goals.
Long Term Liabilities to Working Capital
Long Term Liabilities / (Current Assets - Current Liabilities)
This ratio measures the degree to which a company's long-term debt has been used to replenish
working capital versus fixed asset acquisition.
The long-term liabilities to working
capital ratio for Liberty Medical Group is
-1.67, which compared to the baseline
of -1.67 indicates the value of this ratio
is meeting the company's expectations.
48 Financial Analysis CS: Sample Reports
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
Sales to Working Capital
Sales / (Current Assets - Current Liabilities)
This ratio measures a company's ability to finance current operations. Working capital (current assets -
current liabilities) is another measure of liquidity and the ability to cover short-term obligations. This
ratio relates the ability of a company to generate sales using its working capital to determine how
efficiently working capital is being used. In general, a lower number is preferred because it indicates a
company has a satisfactory level of working capital. However, an exceptionally low number may
indicate inadequate sales levels are being generated.
The sales to working capital ratio for
Liberty Medical Group is -39.98, which
compared to the baseline of -39.22
reveals that the company's level of
working capital is strong. The company
may want to make an effort to generate
additional sales using the available
working capital.
The following list includes several suggestions Liberty Medical Group should consider to improve the
liquidity ratios:
Reduce days in accounts receivable to improve current assets by evaluating accounts receivable on a
more frequent basis and take a more assertive stance in the collection of accounts receivable and
delinquent accounts.
Prepare thorough cash forecasts and evaluate the company's ability to meet goals on a regular basis.
Consider paying off short-term obligations if the cash position of the company is favorable.
Consider converting short-term debt to long-term debt.
Reduce levels of non-moving inventory.
Financial Analysis CS: Sample Reports 49
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
Activity ratios provide a useful gauge of a company's operations by determining, for example, the
average number of days it takes to collect on customer accounts and the average number of days to
pay vendors. A key point to keep in mind when evaluating these ratios is that seasonal fluctuations are
not necessarily reflected in the numbers that are derived from these calculations based on an account
balance on one single day.
Accounts Receivable Turnover
Sales / Trade Accounts Receivable
This ratio measures the number of times receivables turn over in a year and reveals how successful a
company is in collecting its outstanding receivables. A higher number is preferred because it indicates
a shorter time between sales and cash collection.
The accounts receivable turnover for
Liberty Medical Group is 60.04, which
compared to the baseline of 57.17
indicates this ratio is on target with
company objectives.
Days Sales in Receivables
Trade Accounts Receivable / (Sales / Days)
This ratio measures the average number of days a company's receivables are outstanding. A lower
number of days is desired. An increase in the number of days receivables are outstanding indicates an
increased possibility of late payment by customers. Companies should attempt to reduce the number of
days sales in receivables in order to increase cash flow. The general rule used is that the time allowed
for payment by the selling terms should not be exceeded by more than 10 or 15 days.
The days sales in receivables for Liberty
Medical Group is 6.08 days that indicates
the company is effective in collecting
outstanding receivables.
Operating Cycle Days
(Inventory / (Cost of Sales / Days)) + (Trade Accounts Receivable / (Sales / Days))
50 Financial Analysis CS: Sample Reports
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
This ratio calculates the total conversion period for a company, or in other words, the average number
of days it takes to convert inventory into cash from sales. It is calculated by adding together the days
cost of sales in inventory to the days sales in receivables. Evaluating this ratio can be helpful in
gauging the effectiveness of marketing, determining credit terms to extend to customers, and collecting
outstanding accounts.
The operating cycle days for Liberty
Medical Group is 6.08 days, which
compared to the baseline of 6.40 days
indicates the company is successfully
minimizing the amount of time it takes to
convert products and services into cash.
Sales to Assets
Sales / Total Assets
This ratio measures a company's ability to produce sales in relation to total assets to determine the
effectiveness of the company's asset base in producing sales. A higher number is preferred, indicating
that a company is using its assets to successfully generate sales. This ratio does not take into account
the depreciation methods employed by each company and should not be the only measure of
effectiveness of a company in this area.
Sales to assets for Liberty Medical
Group is 6.64, which compared to the
baseline of 6.48 indicates the company
is performing well in this area.
Sales to Net Fixed Assets
Sales / (Property and Equipment - Accumulated Depreciation)
Financial Analysis CS: Sample Reports 51
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
This ratio measures a company's ability to effectively utilize its fixed assets to generate sales. This ratio
is similar to the sales to assets ratio, but it excludes current assets, long-term investments, intangible
assets, and other non-current assets. A higher number is desired, indicating that a company
productively uses its fixed assets to produce sales. This ratio does not take into account the
depreciation methods employed by each company and should not be the only measure of effectiveness
of a company in this area. In addition, fixed assets that are almost fully depreciated, and labor-intensive
operations may interfere with the interpretation of this ratio.
Sales to net fixed assets for Liberty
Medical Group is 19.59, which
compared to the baseline of 19.13
indicates the company is making
effective use of its fixed assets to
generate sales.
Percent Depreciation Expense to Fixed Assets
Depreciation Expense / Property and Equipment * 100
This ratio measures the reasonableness and consistency of a company's depreciation expense over
time.
The percent depreciation expense to
fixed assets for Liberty Medical Group is
25.20%, which compared to the
baseline of 24.60% indicates the value
of this ratio may not be meeting the
company's expectations.
Percent Accumulated Depreciation to Fixed Assets
Accumulated Depreciation / Property and Equipment * 100
This ratio measures the cumulative percentage of productive asset costs a company has allocated to
operations.
52 Financial Analysis CS: Sample Reports
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
The percent accumulated depreciation
to fixed assets for Liberty Medical Group
is 14.80%, which compared to the
baseline of 14.80% indicates this ratio is
on target with company objectives.
Net Fixed Assets to Equity
(Property and Equipment - Accumulated Depreciation) / Total Equity
This ratio measures the extent to which investors' capital was used to finance productive assets. A
lower ratio indicates a proportionally smaller investment in fixed assets in relation to net worth, which is
desired by creditors in case of liquidation. Note that this ratio could appear deceptively low if a
significant number of a company's fixed assets are leased.
Net fixed assets to equity for Liberty
Medical Group is 4.34, which compared
to the baseline of 4.26 indicates the
company's performance may be
insufficient in this area.
Financial Analysis CS: Sample Reports 53
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
Profitability ratios measure a company’s ability to use its capital or assets to generate profits. Improving
profitability is a constant challenge for all companies and their management. Evaluating profitability
ratios is a key component in determining the success of a company. It is important to note that all
profitability ratio calculations are based on earnings before taxes.
Percent Gross Profit
((Sales - Cost of Sales) / Sales) * 100
This ratio measures the gross profit earned on sales and reports how much of each sales dollar is
available to cover operating expenses and contribute to profits.
The percent gross profit for Liberty
Medical Group is 100.00%, which
compared to the baseline of 100.00% is
a good indication of financial health for
the company.
Percent Profit Margin on Sales
Earnings before Taxes / Sales * 100
This ratio measures how much profit a company makes on each sales dollar received and how well a
company could potentially deal with higher costs or lower sales in the future.
The percent profit margin on sales for
Liberty Medical Group is 0.56%, which
compared to the baseline of 0.51%
indicates sales are significantly
contributing to the company's bottom
line.
Percent Rate of Return on Assets
Earnings before Taxes / Total Assets * 100
This ratio measures how effectively a company's assets are being used to generate profits. It is one of
the most important ratios when evaluating the success of a business. A higher number reflects a well
managed company with a healthy return on assets. Heavily depreciated assets, a large number of
intangible assets, or any unusual income or expenses can easily distort this calculation.
54 Financial Analysis CS: Sample Reports
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
The percent rate of return on assets for
Liberty Medical Group is 3.74%, which
compared to the baseline of 3.28%
indicates the company successfully
utilizes its asset base to generate
profits.
Percent Rate of Return on Equity
Earnings before Taxes / Total Equity * 100
This ratio expresses the rate of return on equity capital employed and measures the ability of a
company's management to realize an adequate return on the capital invested by the owners in a
company. A higher number is preferred for this commonly analyzed ratio.
The percent rate of return on equity for
Liberty Medical Group is 47.84%, which
compared to the baseline of 40.92%
indicates the company's management is
performing effectively in this area.
Financial Analysis CS: Sample Reports 55
Liberty Medical Group
Detailed Ratio Analysis - Group Comparison
Coverage ratios assess a company’s ability to meet its long-term obligations, remain solvent, and avoid
bankruptcy. It measures how well a company’s cash flow covers its short-term financial obligations.
Lenders evaluate coverage ratios to determine the degree to which a company could become
vulnerable when faced with economic downturns. A company with a high level of debt poses a higher
risk to long-term creditors and investors.
Debt to Total Assets
Total Liabilities / Total Assets
This ratio measures what proportion of debt a company is carrying relative to its assets. A ratio value
greater than one indicates a company has more debt than assets. Naturally, companies and creditors
prefer a lower number.
The debt to total assets ratio for Liberty
Medical Group is 0.92, which compared
to the baseline of 0.92 indicates the
company should be able to withstand
losses without harming creditor interests
or could obtain additional financing if
desired.
Percent Owners Equity
Total Equity / Total Assets * 100
This ratio measures what proportion of total assets was provided by the owners equity. The higher the
number the more total capital has been contributed by owners and the less by creditors.
The percent owners' equity ratio for
Liberty Medical Group is 7.81%, which
compared to the baseline of 8.01%
indicates the company may not own an
adequate or large enough portion of its
asset base.
Equity Multiplier
Total Assets / Total Equity
This ratio measures the extent to which a company uses debt to finance its assets. The higher the
number is, the more a company is relying on debt to finance its assets.
56 Financial Analysis CS: Sample Reports
