Question

	Solar	Sun	Moon	Industry Average
Current Ratio	1.01	1.01	0.86	1.56
Acid-test Ratio	0.23	0.21	0.22	0.93
Debt to Equity	278.46	230.25	155.01	149.79
LTD to Equity	116.96	81.43	70.92	107.29
Interest Coverage	2.96	9.67	3.54	6.51

1. Make a conclusion on Solar Co. performance comparing to Sun Co. and Moon Co.

2. If any, what actions should Solar Co. take to improve?

Answer 1

1) • we can see that current ratio and acid test ratio was higher in solar co compared to sun co & moon co, we can understand solar co is in better position than sun co & moon co and having ratio of cash balance to current liabilities is higher in solar co

• solar co now presently having higher amount of debt (short and long term) compared to equity, of course it is benefited by tax savings. But it is hard to perform daily operation in solar co than sun co and moon co.

2) • solar co interest coverage ratio was lower, we can understand that profit of solar co is 2.96 times of interest, solar co need to improve the profit by increasing the sales volume and need to concentrate on cost savings methods to increase profit percentage.