The purpose of this research is to perform a financial analysis on the Zero Corporation. The company is a leading supplier of electronics packaging. It also produces cooling equipment and accessories for the electronics industry, and is the country's leading producer of air cargo enclosures.
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 1986 1988 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 por tion of the company's long term 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 one half of one percent.
The company's liquidity position may be expected to improve significantly in fiscal year 1990, because no unusually large volume of long term debt will mature in that year. Nevertheless, the approximately 40 percent increase in current liabilities other than the current portion of long term debt in fiscal year 1989 is a warning signal. The company needs to address this problem in fiscal year 1990.
The company's income structure is analyzed through the development of common size income statements for fiscal years 1987 through 1989. These statements are presented in Table 1, which may be found beginning below on this page.
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