Rondo's Current Ratio is a steady at 2.0 compared to the industry average of 1.4. This indicates the company will not have a problem covering its current liabilities. Rondo's quick ratio is also steady at 1.4. The company can cover its short-term debt 1.4 times over without selling off its inventory. Rondo's performance is good in this area.
Rondo's Inventory Ratio declined to 9.5 in 2005, down from a ratio of 10 in 2003 and 2004. Rondo's sales improved year-over-year and the decline in inventory turns may be the result of carrying more inventory in response to increased sales. However, Rondo is still carrying too much inventory or the company may have excess obsolete inventory. Rondo needs to utilize just-in-time methods to improve inventory turn over. (Nice catch.) Carrying fewer inventories is required to improve efficiency and reduce cost. Rondo's performance is poor in this area.
The Days Sales Outstanding (DSO) ratio for Rondo is showing improvement, but 71 days is too long to have cash due tied up, assuming that Rondo has extended Net30 or Net35 credit terms to their customers. Much more effort needs to be put into collections since it seems some customers are not paying their bills on time. Rondo's performance is poor in this area. (Could there be other issues here? Are they selling to customers who have no intention of paying them back? Will they have to write-off some receivables?)
Rondo is showing steady improvement in its Fixed Assets Turnover ratio. Total Assets Turnover ratio is a measure of all assets measured against sales. Rondo is showing improvement in this area at 1.0, but is still below the industry average of 1.1. Rondo's performance is fair in this area.
Rondo has very good debt ratio numbers which puts them in a good position should they need to borrow additional funds. Rondo's Debt Ratio dropped from 45% in 2003 to 38% in 2005. This is a positive trend, as creditors prefer a lower ratio.(They are still below industry avg in debt to assets. This is actually a good thing.) Creditors are more reluctant to lend more money if the ratio is too high. The industry average is 40% and Rondo is below this at 38%. Rondo's performance is good in this area.
Rondo has shown significant improvement in the Times Interest Earned (TIE) ratio. In 2003, Rondo's TIE ratio was 4.9 and in 2005, it's 7.6. This means Rondo's interest is covered 7.6 times. Rondo's performance is good in this area
Rondo's profit margin has shown improvement from 7% to 8%, but it is still below the industry average of 10%. Rondo's poor performance appears to be the result of inefficient operations - costs are too high. Rondo's is improving in this area, but must do better to remain competitive. (Will they have bad debt in the future?)
Rondo has improved in the Basic Earning Power ratio each of the last three years, from 13% to 15%. Rondo will continue...