Assessment of Martha Stewart Company

Martha Stewart Company
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Martha Stewart Company
1 Profitability Ratios
Return on total assets
$5,058/$121,479 = 0.0416 (4.16%)
2 Liquidity Ratio
Current ratio
81,682/36,549 = 2.2349
3 Leverage Ratios
Debt-to-assets
1,000/121,479 = 0.0082
4 Activity Ratio
Total-assets turnover
141,916/121,479 = 1.1682
5 Shareholders’ Return Ratios
Price-earnings ratio
6.42/0.09 = 71.33
The return on total assets ratio is a profitability ratio that compares Martha Stewart Living Omnimedia Inc.’s total assets against the amount of money it compensates its shareholders. This ratio indicates how well the media company's investments generate value, and it is a measure of its productivity. On the other hand, the current ratio is a liquidity ratio that assesses Martha Stewart Living Omnimedia Inc.'s ability to pay off short-term obligations, including debts to be paid within one year. Thus, the ratio indicates how well the organization capitalizes on its current assets to meet its current obligations and other payables (Accounting Tools, 2021). Conversely, the debts-to-assets ratio is a leverage ratio that indicates Martha Stewart Living Omnimedia Inc.’s overall risk. Companies with a higher ratio are highly leveraged and are thus riskier to invest in or give loans to.
The total assets turnover ratio is an activity ratio that evaluates how efficiently Martha Stewart Living Omnimedia Inc. uses its assets to facilitate a sale. It indicates how proficiently company assets are being used to move goods and services. On the other hand, the price-earnings ratio is a shareholders' return ratio that assesses the association between the company’s stock price and earnings per share (CFI, 2015). The ratio is an indication of the market's expectations concerning the company's profitability.
Of the five ratios, the one that provides the most insight into the firm's current level of performance is the profitability ratio since it is a measure of the firm's current productivity. One can assess if the results of the calculations are positive or negative by checking the company's liabilities against its assets (Donohoe, 2019). The higher debt-to-equity ratio and higher financial liabilities than financial assets usually indicate negative financial ratios. The ratio that gives me concern about the organization's current strategy is its activity ratio. Martha Stewart Living Omnimedia Inc. is not capitalizing on its assets to push sales. The company needs to evaluate its marketing and distribution strategies and make them more efficient to increase overall sales while reducing operational expenses.
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