The profitability of the USX Corporation, U.S. Steel and marathon Oil is also reducing. Gross profit margin of the group and its components is reducing, except for U.S. Steel the gross profit margin is decreasing slightly. U.S. Steel’sprofitability can said to be the worst among the group but if the profitability position of U.S. Steel is compared with other companies in the industry,then it is still far better. All other companies such as Armco, Bethlehem and Inland are facing extreme reduction in the profits while the decrease in the profitability is moderately affected by the poor economic conditions. Furthermore the net profit margin appears to be very low and has beenreduced by almost 50% in two years. Other profitability ratios are also decreasing which indicates the poor performance of the U.S. Steel
Same is the case for the Marathon Oil, its gross profit is also decreasing but the decrease is small, on the other hand, the reduction in the profits of its rivals is very huge. The net profit margin of Marathon group is improving as compared to previous years but still the net profit margin is very low and little fluctuations in the expenses and revenues can make the Marathon Oil a loss making company.
The efficiency ratios of the group are also poor, accounts receivables turnover ratio is increasing for all the components of the group which indicates that the performance of the credit control department is deteriorating. Furthermore, increase in accounts receivable days is also results in the increase in the bad debt expense. The inventory turnover days are also increasing of the group except for the marathon Oil; the increase in inventory turnover days also have negative consequences on the performance of USX Corporation. Firstly, it indicates that the inventory is taking longer to generate cash, secondly, the holding cost might be increased because USX now have to hold the inventory for the longer period of time. Lastly, the chances of damage tothe inventory are also higher as the company is holding it longer. However, further information is needed regarding the industry averages in order to analyze the performance of USX more critically. Accounts payable ratios of the group are also poor as compared to the previous year, this is can be good for the company to some extent because it can use the cash for the fulfillment of its various needs. Apart from this benefit, higher payable days may deter the company to take advantages of early payment discounts.
The solvency ratios of the group appear to be very poor. Particularly the gearing ratio of Marathon Group, which appears to be very deprived; the increased gearing might have some very negative impacts on the company and the group. Firstly, higher gearing may increase the risk of ordinary shareholders, at the time of liquidation common stockholders will receive their sum in last and the debt holders will be preferred at the time of liquidation in compensation of this fact they might increase their returns……………………
This is just a sample partical work. Please place the order on the website to get your own originally done case solution.