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Managing Tomorrow's Resources Today <br />Ms. Jennifer Auletta <br />April 29, 2015 <br />Page 9 of 14 <br />For three of the seven financial ratios examined, ACI's ratios produced a less than favorable <br />measurement than the industry average. The three ratios (indicated in red) are the ratios that best <br />indicate the company's ability, or in ACI's case, the potential inability to meet its day-to-day obligations. <br />Below is a description of each of the ratios and how to interpret them. <br />• Current Ratio — the rough measure of a company's ability to pay its current obligations. The higher <br />the ratio the better. <br />• Quick Ratio — a more conservative measure of a company's ability to pay its current obligations <br />measured by its most liquid assets. The higher the ratio the better. <br />• Working Capital - measure of cash and liquid assets available to fund a company's day-to-day <br />operations. A positive working capital balance is ideal; however, the solid waste industry standard is <br />indicates a 10% negative balance is "normal". <br />• Debt to Equity Ratio - measures the relationship between capital contributed by creditors and that <br />contributed by owners. The lower the positive ratio, the greater the financial stability and <br />borrowing flexibility. <br />• Current Debt to Worth — expresses the relationship between capital contributed by creditors and <br />current capital contributed by owners. The higher the ratio the greater the risk being assumed by <br />creditors. A lower ratio generally indicates greater long — term financial safety. <br />• Return on Assets — measures effectiveness of a company's management in employing the resources <br />available to it. <br />• Profit Margin — measures a company's return on total sales <br />Table 7 summarizes results of the financial ratio benchmark comparisons performed. <br />Table 7: <br />Financial Ratio Analysis Summary <br />Note: MM = $ million and red highlighted numbers indicate less than favorable ratios when compared to Industry <br />ACI <br />ACI <br />ACI Z5r11FT1 <br />& Over <br />Type of Ratios <br />Measurement <br />0. <br />0. <br />06/30/2014 <br />Industry <br />Liquidity <br />Current Ratio <br />0.57 <br />0.64 <br />0.53 <br />0.90 <br />Quick Ratio <br />0.56 <br />0.62 <br />0.52 <br />0.70 <br />Working Capital <br />$ (2,506,297) <br />$ (2,063,969) $ (6,050,205) <br />Capital Structure <br />Debt to Equity Ratio <br />0.89 <br />1.86 <br />1.89 <br />3.50 <br />Current Debt to Worth <br />0.25 <br />0.22 <br />0.77 <br />0.83 <br />Operating <br />Return on Assets <br />8.25% <br />7.17% <br />2.89% <br />7.30% <br />Profit Margin <br />5.07% <br />6.33% <br />2.53% <br />4.50% <br />#of More Favorable <br />9 <br /># of Less Favorable <br />11 <br />#of Even <br />1 <br />Note: MM = $ million and red highlighted numbers indicate less than favorable ratios when compared to Industry <br />