Financial Analysis of Zero Corp.

This financial analysis assesses the company's financial condition from five perspectives. These perspectives are (1) liquidity, (2) income structure, (3) sales growth, (4) cash flow, and (5) interest coverage.

The company's current ratio at the close of fiscal year 1989 (31 March) was 2.5:1. While this ratio does not indicate that the company is in a liquidity crisis, it does represent a major deterioration from the levels experienced in the 19861988 time period, when the company's current ratio ranged between 4.2:1 and 4.4:1.

The major culprit in the deterioration of the current ratio was a dramatic increase (1.6 times) in the current portion of the company's longterm debt, although smaller increases (an average of 0.4 times) were recorded in all other elements of the company's current liability structure. By

1 2contrast, the company's current assets increased by only onehalf of onepercent.

The company's liquidity position may be expected to improve significantly in fiscal year 1990, because no unusually large volume of longterm debt will mature in that year. Nevertheless, the approximately 40 percent increase in current liabi

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Approximate Word count = 912
Approximate Pages = 4 (250 words per page)

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