Referring to the ratio multiples of the company, we found that CanGo is in a very strong position to take up the new projects. Beginning with the working capital analysis, the company is having the current ratio of 5.39 and quick ratio of 4.53, which confirms the strong liquidity position and the ability to handle short-term liquidity requirements. Important to note, even the working capital amount of $164.5 million also confirms strong liquidity position of the company.
Moreover, the existing net profitability , which is recorded at 10.97%, also confirms that the company is utilizing its available resources and assets effectively and is churning a sustainable profit figures. This justifies the company’s ability to take up new projects and enhance its profitability further. Important to note, the return on assets, so recorded at 2.33%, cannot be considered to be an appreciable profitability figure, therefore, with high liquidity and sustainable net profitability, the investment in new projects will also be a good opportunity for the company to enhance its return on assets.
Finally, the debt equity ratio, which is recorded at 67%, indicates that the firm is majorly financed with debt financing and if the company is considering new projects, it must resort to equity financing or should at least consider to maintain an optimal capital structure with the intend to keep the cost of capital at minimum levels.
Therefore, considering the overall scenario, CanGo is in a strong liquidity and profitability position to take up new projects, however, it must act meticulously in relation to financing decisions relating with these projects and should maintain the optimal capital structure.
Comparing the liquidity ratios of CanGo with that of competitor companies, we found that the entity is the most liquid firm amongst the selected group of companies. Important to note, compared to other companies, even though the company is having least working capital, however, with current ratio and quick ratio significantly higher than the other companies, we confirm that CanGo is having strong liquidity roots.
Profitability Ratios:
In terms of profitability, CanGo is performing relatively well than Amazon and Barnes and Noble, however, it lags behind Apple Inc., which recorded net profit margin of 22.85% compared to 10.97% of CanGo. Moreover, Apple Inc.’s ROA also surpasses CanGo’s with former company recording ROE multiple at 18.38% compared to 2.33% of CanGo.
Leverage Ratios
Analysis of leverage ratio help us in decomposing the capital structure of the company. Following the analysis, we found that CanGo is operating with the debt equity ratio of 67% compared to 54% of Apple Inc. and 106%of Amazon. This indicates that compared to their companies, CanGo is moderately levered.
Efficiency Ratios
Referring to the efficiency ratios we found that the company have a poor asset management performance with least inventory turnover and receivable turnover ratios amongst the group of companies that we analyzed. Low inventory and receivable turnover ratio indicate that it takes a high amount of time for the company to sell its inventory and collect the receivables.
