Fianancial Analysis: Profitability

Financial Analysis

Time Series Analysis

Profitability

From the DuPont analysis, we can find that the Net profit margin, Return on asset and Return on equity had increasing trend through 1982 to 1989 and they dropped to the lowest point in 1987. In 1987 they recovered. This indicated the profitability of Redhook Ale Brewery were getting better and better during last two years and slightly recovered in this year. Generally, Asset turnover had an ascending trend and financial leverage also had an ascending trend.

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Liquidity

The Current ratios and Quick ratios of Redhook Ale Brewery also had an increasing trend through 1982 to 1989. Generally, a current ratio below one could signal an unhealthy position. Although the Current ratios worsened during the past 5 years but were still all above one, it could mean Redhook Ale Brewery’s liquidity situation was relatively healthy

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Sovency Analysis

When we judge about solvency of Redhook Ale Brewery according to the financial statements, we must consider debt-equity ratio and debt-asset ratio. By this two, it can be understood whether a company is enough solvent for running its operational activities without any hassle/ uncertainty. Because, it is measured by total debt of the company to be paid off with respect to invested equity or assets. Here we see the debt-equity ratio of Redhook Ale Brewery getting downward trend from 1983and in 1987 it was lowest 0.49 which all is very positive matter for the company. As we know the lesser the ratio, the greater the solvency and more than 1 is bad. But, the good sign is that after 1983 it is gradually decreasing which shows its lower volume of loan required for operating activities. At the same time its debt-asset ratio also getting much better trend showing solvent nature indeed compare to prior years.