Project Financing

Understanding the Numbers for Better Decisions

Jenine Lucky-Stinson

June 18, 2014

Financial Practices for Managers | MS6014 A01

Dr. Laurene Collins

Argosy University

Understanding the numbers for better decisions

My company of choice is the Bernard L. Madoff Investment Securities LLC which is a broker and dealer that is registered with the Securities and Exchange Commission. The company is also a member of the financial industry regulatory authority and various exchanges. The company is involved in various brokerage and trading activities with counter parties basically involving brokers and dealers, banks and other financial institutions. If the counterparties do not fulfill their parts, the company may be exposed to risks. The default risk depends on the creditworthiness of the issuer of the instrument or the counter party. The furniture and the equipment of the company are stated at a cost with less accumulated depreciation and depreciation as provided on the MACRS method over the approximated useful life of the asset, normally five or seven years.

The company’s cash and cash equivalent consists of highly liquid investments and cash itself. These are not held for resale with maturities when bought of either three months or less. The company records the securities that are loaned and borrowed at the amount of cash collateral received or advanced in connection with these transactions. The assets, income statements and the liabilities accounts that are denominated in foreign currencies are at the end of the year translated at the financial year end exchange rates. The losses and gains that are obtained resulting from the transactions of foreign currencies are included in the net income.

Proprietary securities transactions in regular trades are recorded on the trade date as if they were settled. The profits and loss that are obtained from all the transactions of securities are entered into the account for risk of the company and are recorded on the basis of trade date. Transactions of customer securities are reported on a settlement date basis with the related commission expenses and income reported on a trade date basis. Securities that are sold or owned but not yet bought are stated at the cited values of the market with resulting losses and gains that are unrealized included in the operations results.

The current ratio which is the ratio of current assets to current liabilities of the company is:

$1,093,314,139

$425,314,139 = $2.57060379

The asst turnover ratio of the company is calculated as the ratio of the annual credit sales to the accounts receivable:

$118,138,569

55,333,291 = $2.13503601

The debt ratio which is defined as the total debt divided by total assets of this company is:

$ 249,818,562

1,093,314,139 = $0.2284966

Return on assets ratio is a quantity of how efficiently the firm's assets are being used to produce profits. It is defined as:

$24,696,565

$ 1,093,314,139 = 0.02258872

The trends reflected in the financial statement means that the company is in a good and stable condition since its assets are more than its liabilities though its ratios are low when compare to other companies that are in the industry and it is facing stiff competition. The company needs to improve on its sales in order to remain at a competitive edge with the other companies.

References

Friehling & Horowitz (2007). Bernard L. Madoff Investment Securities LLC: Statement of financial condition. New city: New York.

Maureen, O. (1995). Market microstructure theory. Oxford: Blackwell.