Financial Analysis of Uni-Select Inc.

Paper Info
Page count 4
Word count 1137
Read time 6 min
Topic Business
Type Essay
Language ­čç║­čçŞ US

Ratio Analysis

Long-term Solvency

Table 1: Debt/Equity Ratio of Uni-Select Inc. and AutoZone Company

Debt/Equity Ratio of Uni-Select Inc. and AutoZone Company

Line Chart Comparing Debt/Equity Ratio of Uni-Select Inc. and AutoZone Company
Figure 1: Line Chart Comparing Debt/Equity Ratio of Uni-Select Inc. and AutoZone Company

The debt to equity shows the proportion that the liabilities have over the company’s resources. Table 1 shows that from 2017 to 2021, Uni-Select Inc. has been at risk because it recorded smaller debt to equity ratio. In addition, the smaller debt to equity shows that Uni-Select pays its creditors at a slow rate (Sami, 2021). On the other hand, AutoZone Company has recorded negative debt to equity ratio; this implies that the company has more liabilities than assets. Additionally, AutoZone is at risk of bankruptcy due to negative debt to equity ratio.

Table 2: Cash Coverage of Uni-Select and AutoZone Company

Cash Coverage of Uni-Select and AutoZone Company

 Line Chart Comparing Cash Coverage of Uni-Select and AutoZone Company
Figure 2: Line Chart Comparing Cash Coverage of Uni-Select and AutoZone Company

The cash coverage determines the cash available to pay for the borrower’s interest expense. Uni-Select has financial issues because table 2 shows that from 2017 to 2021, the company has ratios that are less than 1 (Sami, 2021). In addition, AutoZone Company has more financial issues than Uni-Select since it has negative cash coverage. Therefore, both companies are in danger of defaulting debts due to a lack of cash.

Turnover Ratio

Table 3: Inventory Turnover of Uni-Select Inc. and AutoZone Company

Inventory Turnover of Uni-Select Inc. and AutoZone Company

Histogram comparing Inventory Turnover of Uni-Select Inc. and AutoZone Company
Figure 3: Histogram comparing Inventory Turnover of Uni-Select Inc. and AutoZone Company

The inventory turnover shows how quickly the inventory affects a company and how fast it makes sales. Table 3 shows that Uni-Select Inc. has good inventory turnover because from 2017-2021, it has recorded ratios over 2.5 (Sami, 2021). This indicates that the company is selling its products promptly. On the other hand, AutoZone Company has bad inventory turnover since it has indicated less than two ratios for the last five years.

Table 4: Networking Capital Turnover of Uni-Select Inc. and AutoZone Company

Networking Capital Turnover of Uni-Select Inc. and AutoZone Company

Histogram Comparing Net working Capital Turnover of Uni-Select Inc. and AutoZone Company
Figure 4: Histogram Comparing Net working Capital Turnover of Uni-Select Inc. and AutoZone Company

Net working capital turnover is used to measure the relationship between the funds used to finance the operation of a company and the revenues it generates to continue operations to become profitable. Table 4 shows that from 2017-to 2021, Uni-Select’s current liabilities exceed the current assets (Sami, 2021). This indicates that it is heavily investing in the current liabilities. AutoZone Company is similar to Uni-Select because, from 2017-to 2021, it has recorded a negative net working capital turnover.

Table 5: Fixed Asset Turnover of Uni-Select Inc. and AutoZone Company

Fixed Asset Turnover of Uni-Select Inc. and AutoZone Company

Histogram Comparing Fixed Asset Turnover of Uni-Select Inc. and AutoZone Company
Figure 5: Histogram Comparing Fixed Asset Turnover of Uni-Select Inc. and AutoZone Company

The fixed asset turnover ratio shows how efficiently a company can generate sales from existing fixed assets. From 2017-to 2021, Uni-Select has favored ratio since it has recorded high values, implying that it is efficiently generating sales from the asset base. AutoZone Company also favored ratios because they were higher than its target (Sami, 2021). Therefore, both companies are generating sales efficiently as required by their management.

Table 6: Total Asset Turnover of Uni-Select Inc. and AutoZone Company

Total Asset Turnover of Uni-Select Inc. and AutoZone Company

Histogram Comparing Total Asset Turnover of Uni-Select Inc. and AutoZone Company
Figure 6: Histogram Comparing Total Asset Turnover of Uni-Select Inc. and AutoZone Company

The total asset turnover measures an organization’s capability to produce sales efficiently. Table 6 shows that from 2017 to 2021, both Uni-Select and AutoZone recorded total asset turnover ratios greater than 1. This means that the two companies have been using their assets more effectively for the past five years, successfully generating more sales (Sami, 2021). This indicates that both companies are performing excellently in the automotive industry.

Profitability Ratios

Table 7: Return on Asset of Uni-Select Inc. and AutoZone Company

Return on Asset of Uni-Select Inc. and AutoZone Company

Line Chart Comparing Return on Asset of Uni-Select Inc. and AutoZone Company
Figure 7: Line Chart Comparing Return on Asset of Uni-Select Inc. and AutoZone Company

Return on Asset (ROA) measures the efficiency of a company to utilize its assets to generate profit through the taxes and earnings before interests. When a company has a high ROA rate, it is appropriately managing its assets to make sales (Sami, 2021). Table 7 shows that Uni-Select significantly decreased from 2017 to 2020 but increased in 2021. This financial situation reveals that the company makes enough income from its assets. On the other hand, AutoZone Company maintained a high ROA for five years.

Table 8: Return on Equity of Uni-Select Inc. and AutoZone Company

Return on Equity of Uni-Select Inc. and AutoZone Company

 Line Chart Comparing Return on Equity of Uni-Select Inc. and AutoZone Company
Figure 8: Line Chart Comparing Return on Equity of Uni-Select Inc. and AutoZone Company

Market Value Ratio

Table 9: Price/Earnings Ratio of Uni-Select Inc.

Price/Earnings Ratio of Uni-Select Inc.

Histogram Comparing Price/Earnings Ratio of Uni-Select Inc.
Figure 9: Histogram Comparing Price/Earnings Ratio of Uni-Select Inc.

Investors use the price/earnings ratio (P/E) to identify the company’s net worth. A higher P/E ratio shows that investors are willing to pay higher share prices because they are expecting the company’s future growth (Sami, 2021). In 2017, 2018, and 2021, Uni-Select recorded 21.19, 16.81, and 990. This shows that the company had some investors willing to invest. In 2019 and 2020, the company did not record any P/E ratio due to incurring losses. On the other hand, AutoZone Company had a high P/E ratio from 2017 to 2021; this shows continuous growth.

Table 10: Earnings per Share of Uni-Select Inc. and AutoZone Company

Earnings per Share of Uni-Select Inc. and AutoZone Company

Line Chart Comparing Earnings per Share of Uni-Select Inc. and AutoZone Company
Figure 10: Line Chart Comparing Earnings per Share of Uni-Select Inc. and AutoZone Company

Earnings per share (EPS) shows the money made by a company for each share of its stock. From 2017 to 2020, Uni-Select’s EPS has been decreasing significantly; this shows that the company has not been making money from stocks. In 2021, the company’s EPS increased; this shows that it is improving on the stock market. On the other hand, AutoZone’s EPS has increased for the past five years.

Strength and Weaknesses

Uni-Select Inc. has financial issues because it has a shortage of cash coverage to pay its creditors. In addition, AutoZone Company has more financial constraints since it is at risk of defaulting to pay. Further on, both companies have an issue concentrating their investments on a particular inventory leading to negative net working capital (Sami, 2021). The market value of Uni-Select has shown that investors are not willing to invest in the company, while on the other hand, investors are competing to invest in AutoZone Company due to promising future growth. The main strength of Uni-Select is that it was able to bounce back quickly to making profits after making a huge loss in 2019 and 2020.

Recommendation

To improve financial ratios, Uni-Select should first pay off its liabilities because it will ensure that it increases the liquidity levels. Secondly, it should use long-term financing, so it has more time to repay its creditors. Thirdly, increasing the profitability by increasing efficiency, reducing costs, increasing productivity and turnover. Fourth, the company is supposed to increase net sales by offering door-to-door services and discounts to the referrals. These recommendations will ensure that Uni-Select improves financial ratios to make them better than AutoZone Company ratios.

Reference

Sami, H. M. (2021). Portfolio construction using financial ratio indicators and classification through machine learning. International Journal of Management and Accounting, 83-90. Web.

Cite this paper

Reference

EssaysInCollege. (2023, April 4). Financial Analysis of Uni-Select Inc. Retrieved from https://essaysincollege.com/financial-analysis-of-uni-select-inc/

Reference

EssaysInCollege. (2023, April 4). Financial Analysis of Uni-Select Inc. https://essaysincollege.com/financial-analysis-of-uni-select-inc/

Work Cited

"Financial Analysis of Uni-Select Inc." EssaysInCollege, 4 Apr. 2023, essaysincollege.com/financial-analysis-of-uni-select-inc/.

References

EssaysInCollege. (2023) 'Financial Analysis of Uni-Select Inc'. 4 April.

References

EssaysInCollege. 2023. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.

1. EssaysInCollege. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.


Bibliography


EssaysInCollege. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.

References

EssaysInCollege. 2023. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.

1. EssaysInCollege. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.


Bibliography


EssaysInCollege. "Financial Analysis of Uni-Select Inc." April 4, 2023. https://essaysincollege.com/financial-analysis-of-uni-select-inc/.