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. Since Shaft s profit ratios are within industry averages, despite their financial and operating inefficiencies, there is a potential opportunity for Shaft to increase its profit margins or market share. The first choice of the firm should be to choose specialization by eliminating the lawn maintenance business and concentrating on the landscaping business. The second choice is vertical integration, and the third is maintaining the status quo. Vertical integration is an effort by a company to control the inputs and outputs that affect its products, in an effort to increase sales and efficiencies.