RIMM: Financial Ratio Analysis
The technology sector, specifically the communication equipment industry, has grown increasingly competitive as innovations to handheld devices continuously enter the market place. The communication equipment industry has vastly changed in recent history as Apple and Android platforms have stolen market share from competitors such as Symbian and Research in Motion. Apple and Android have well positioned themselves as market leaders yet a very interesting fight has emerged for third place between Windows and Research and Motion. Research in Motion, maker of BlackBerry is positioning themselves for a comeback but investors ...view middle of the document...
1%. The company’s solvency position is another strong point because having no long-term debt means having no long term default risk. Maintaining debt has positive aspects that RIMM’s management has chosen to overlook, including a tax deduction for interest expense. In a time where RIMM has struggled to produce satisfactory earnings, they may want to consider the advantages of financing their operations partially with debt.
| |2012 |2011 |Industry |
|Debt Ratio |n/a |n/a |24.1 |
|TIE |n/a |n/a | |
Research in Motion has had the ability to maintain a very strong financial position from a liquidity standpoint but their inventory management raises concerns for investors. RIMM’s three major turnover ratios have decreased year over year since 2011. Inventory turnover decreased from 17.88 in 2011 to 14.41 in 2012; both figures drastically lower than the industry average of 45.93. RIMM heavily relies on the sale of their BlackBerry devices to create revenues so poor efficiency in inventory turnover is a very weak catalyst for the company. They are underperforming the industry in 3 out of the 4 productivity categories which correlates to their evaporating market share in the communication equipment market. RIMM’s management needs to refocus attention to properly managing their inventory and providing a product that will allow a better turnover and stronger revenue streams.
| |2012 |2011 |Industry |
|Inventory Turnover |14.41 |17.88 |45.93 |
|Days Sales Outstanding |69.47 |60.04 |55.71 |
|Fixed Asset Turnover |7.02 |8.93 |12.98 |
|Total Asset Turnover |1.39 |1.73 |1.12 |
A look at RIMM’s profitability ratios once again raises concerns for investors. RIMM has seen across the board decreases in profitability from 2011 to 2012. The company has struggled to provide a product to the market that entices consumers which can be seen clearly in their resulting profitability ratios. In 2011 RIMM hired Thorsten...