In terms of debt paying ability, in the first year, White Mountain Cofee’s current interest rate, quick ratio and cash ratio were 150.19%, 100.25% and 6.8% respectively; in the second year, the current interest rate, quick ratio and cash ratio were 169.33%, 113.43% and 3.76% respectively.
It can be seen that the short-term solvency of the second year has increased compared with that of the first year. The possible reason is that the company is gradually reducing the proportion of current liabilities, which can keep the company in a state of sufficient liquidity and guarantee the company’s future financing ability with liabilities.
In the first year, the asset-liability ratio, equity ratio and equity multiplier of White Mountain Cofee were 50.51%, 102.6% and 202.06% respectively. In the second year, the asset-liability ratio, equity ratio and equity multiplier were 41.41%, 70.68% and 170.68% respectively.
It can be seen that the company increases the proportion of long-term debt in the second year. Since the interest of long-term debt can act as a tax shield, it can reduce the weighted average cost of capital of the company to some extent, thus helping to improve the profitability and value of the company.
However, it is worth noting that when the proportion of debt is too high, the cost of financial crisis brought by debt may be higher than the income brought by tax deduction. Therefore, the financial leverage ratio should be kept within a reasonable range, which is still within a reasonable range at present.
In terms of operating capacity, in the first year, the accounts receivable turnover, inventory turnover, current assets turnover, fixed assets turnover and total assets turnover of White Mountain Cofee were respectively 1095.05%, 972.33%, 565.90%, 270.15% and 182.86%.
The accounts receivable turnover, inventory turnover, current assets turnover, fixed assets turnover and total assets turnover of the second year are respectively 918.53%, 907.11%, 516.22%, 312.29% and 194.58%, thus it can be seen that White Mountain Cofee has a strong operational capacity.
Turnover are at a higher level, the second year of turnover has decreased from the first year, mainly because the White Mountain Cofee is in order to improve the level of earnings and to a certain extent, reduce the turnover rate, but it is worth noting that while reduce the turnover rate can improve profitability in a certain extent, but also increase the management risk of the enterprise,
Therefore, the turnover rate must be kept at a reasonable level. At present, the turnover rate of White Mountain Cofee is within a reasonable range.
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