Industry Analysis
Our company manufacturers belay devices. The largest competitors our company faces is Mammut and Black Diamond. Both companies are privately owned and operated, therefore financial information was unable to be disclosed. To resolve this problem, financial information from the aluminum industry was analyzed because aluminum is the primary component in constructing the belay device.
The three aluminum companies analyzed were Reliance, Alcoa and Empire Resources. Industry benchmarks were found by taking each company’s ratios for the years 2003-2006 and calculating their averages which can be found in Table 2. The four types of ratios analyzed were leverage ratios, liquidity ratios, profitability ratios and efficiency ratios.
For leverage ratios, the equity multiplier and times interest earned gives two benefits. The first is to see how the company carries their debt structure and for the latter, if enough money is made to cover the company’s interest payments. The equity multiplier averages for the companies are all over one for each of the four years evaluated. This indicates that they carry debt in their capital structure. Furthermore, the average percentage of debt each company carries can be found in Table 2. Times interest earned is how effectively a company covers their interest payments. A number between four and nine is considered to be good; the aluminum industry is just below four, which is acceptable. When times interest earned ratios are equal to one, a company has just enough revenue to cover their interest payments
Liquidity ratios show how easily the firm can lay its hands on cash to pay off their short-term debt. The current ratio can signal trouble i ...