The financial position of Phelps Dodge Corp Financial Analysis can be evaluated by taking a look at its ratio analysis.
We can see in appendix 1 how the profits has been declining for many years after 2005. Nevertheless, the reality that the gross profit margin has decreased also suggests that the cost of sales have actually not decreased at the exact same rate. The declining net success, revealing a negative pattern from 2006 to 2007 recommends that expenses have actually increased far more than the business is able to handle provided its current resources. With a long term financial obligation adding to the interest cost, Phelps Dodge Corp Financial Analysis remains in alarming requirement of an alternative profits stream.
Decreasing Liquidity: We can see a significant declining trend in the present ratio too revealing a fall in liquidity which is another point of issue for Phelps Dodge Corp Financial Analysis particularly as it has a long term debt to pay off. With the current possessions not in a position to settle the present liabilities, we can see how the company would be in a significant financial trouble unless the cash flow enhances with additional sources of financing.
We might check out the financial condition of Phelps Dodge Corp Financial Analysis even more by looking at the company's overall financial obligation to total assets ratio in appendix 2. We can see how the total possessions of the company have been decreasing from 2005 onwards. The long term debt has actually stayed at $160 million while the brief term financial obligation has increased side by side. Such a situation has brought Phelps Dodge Corp Financial Analysis to a point where its overall debt to overall properties ratio has actually increased. A rising total financial obligation to total possessions ratio suggests that the danger has actually increased in regards to the business's assets not sufficing to cover its overall liabilities. This may not be showing the general liquidity position however gives clearness in terms of the overall financial position of the business.