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Cango Financial Analysis

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Financial Analysis To help CanGo better understand their financial condition, this section goes into details about the current financial condition of CanGo as well as give our recommendations for CanGo to better help them understand their financial position. This analysis will discuss the profitability, liquidity, efficiency, and debt ratios compared to its competitors. Knowing this will help CanGo make better financial decisions in the future.
Profitability Ratios Profitability ratios show us whether the companies has the ability to generate profits from its operations. These ratios are important to the company as well as its investors. Profitability ratios let us know the overall performance and efficiency of the company. This includes …show more content…

Comparing CanGo to its competitors and industry average, CanGo is lower than Amazon, Google, and Industry Average, but higher than Barnes and Noble,. CanGo needs to seek ways to increase return on equity by finding ways to lower its taxes by taking advantage of any government policies, subsidies, or incentives or even certain tax breaks (Robertson).
Liquidity Ratios Liquidity ratio lets us know whether the company is able to pay their short-term and long-term obligations. It measures how well the company can raise cash or convert assets into cash. Companies like to use this ratio to compare it against its competitors or industry average. Liquidity ratios include current ratio, quick ratio, and working capital.
Current Ratio Current ratio shows how well the company can pay off its short-term liability obligations. Short-term liabilities are debt due within the next year. Companies that have larger amounts of current assets are better able to pay off their current liabilities. The higher the ratio, the better able the company is to pay current obligations. A low ratio indicates the company is weighted down with current debt and the cash flow will suffer. The equation for current ratio …show more content…

Since the working capital is positive, the company is not expected to suffer from liquidity and the company is able to pay off its short-term obligations (Working Capital). Having a high working capital might mean the company can expand. However, in CanGo’s situation, we recommend that CanGo implement an effective working capital management plan first before considering expanding. This would involve cash management, inventory management, debtors’ management, and short-term financing (Working Capital Calculator).
Efficiency Ratios Efficiency Ratios tells us how well the company uses their assets to generate income. These ratios look at how long it takes to collect cash from customer and to convert inventory to cash. Efficiency ratios are connected with profitability ratios because if they are efficient, then they become profitable. The type of efficiency ratios include accounts receivable turnover and inventory turnover.
Accounts Receivable Turnover Accounts receivable turnover measures how many times a company can turn its accounts receivables into cash. This ratio shows how well the company is collecting credit sales from its customers. The equation for accounts receivable turnover

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