Solvency demonstrates a company s ability to meet is current liabilities. The Shaft Company is extremely solvent. While being solvent demonstrates a strong financial position, we also must question if the company s assets are being used to their greatest capacity. The largest accumulations of assets are tied up in inventory, and at the end of 19x3, were almost eight times the industry average. The firm s current liabilities to equity are also extremely low, demonstrating possible opportunities to make equity work harder for them.
Efficiency ratios identify the extent to which the firms operations are being run efficiently.
The average landscaping firm turns its assets over nearly 6 times a year. Shaft is only turning its assets over one and a half times a year. This indicates that Shaft is carrying too much inventory, and may be carrying inventory that is not desired by the market place. Profitability lets the observer know how profitable the firm is compared to the industry average. Shaft s profitability is average for the industry.