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Module 3 Assignment: Analytical Case Study on "TechGrowth Inc."

Nneoma .A. Edebeatu

Masters of Business Administration

ACC 6050: Accounting and Financial Reporting

Nexford University

Dr. Damian Dunbar

October 9, 2024
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REVIEW OF THE FINANCIAL STATEMENT

1. Analysis of the Balance Sheet :

Total Assets: Total amount of assets increased from $ 265,000 in 2022 to $ 334,000 in 2024, which
indicated expansion in the company.
Current Assets: The obvious improvements in the cash account from $34,000 to $65,000, in the inventory
from $28,000 to $32,000, and also an increase in accounts receivable from $35,000 to $45,000 which shows
higher sales on credit and that the liquidity has improved.
Non-Current Assets: Increase of property, plant, and equipment from $140,000 to $160,000 indicates
either an increase in capacity or operation. The intangible assets grew slowly from $28,000 to $32,000.
Total Liabilities: Remained flat at $120,000, thus the company did not increase its total liabilities a fact that
can be considered as a sign of good financial management. However:
Current Liabilities: Rose from $40, 000 to $60, 000 through accounts payable and short-term debt
revealing higher obligations within the short-term period.
Long term Liabilities: This dropped from $80,000 in 2022 to $60,000 in 2024, shows that the long term
liabilities reduced and that the long term financial health of the company has improved.
Equity: Rising from $145,000 to $214,000 which is mostly from the retained earnings, and it shows that the
company reinvested profits into the business. This improved the capital base of the company.

2. Analysis of the Income Statement:

Revenue Growth: The sales revenue increased from $ 220,000 in 2022 to $ 280,000 in 2024, an increase of
27%. This shows the good business performance and possible expansion of the market.
Expenses: Although the revenue has gone up, the expenses have also gone up especially the cost of goods
sold, from $130 000 to $170, 000. The operating expenses increased moderately from $45000 to $55000, the
interest expenses on the other hand declined from $6000 to $4000 due to early pay off of long term debt.
Net Income: It has risen from $31,000 in 2022 to $39,000 in 2024 because of the overall increase in
profitability despite the increase in costs. This is a good sign in regards to controlling expenses as the
company’s revenues are on the rise.
3. Analysis of Cash Flow Statement:
Cash Flows from Operating Activities: Increased from $37000 in 2022 to $46000 in 2024, this is in line
with the increase in net income and sound operation performance. Higher accounts receivables and
inventories slightly decreased some cash inflow, but the company did well with the working capital.
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Cash Flows from Investing Activities: Investment in property, plant, and equipment (PPE) increased from
$18,000 in 2022 reaching $22,000 in 2024 proving investment in growth and operational capacity.
Cash Flows from Financing Activities: The financing activities section resulted in a net cash outflow due
to frequent redemption of long-term debt at $15,000 annually, while the company occasionally issued
$10,000 worth of common stock every year to keep the balance.
Net Cash Position: Increased from $34,000 in 2022 to $69,000 in 2024 thus, showing good liquidity and
cash management.(Ready Ratios, 2011).
Key Observations:
Improved Liquidity and Profitability: The Company has a healthier balance sheet with growing assets and
higher profitability. An increase in cash reserve and net income indicates good management of finance.
Declining Debt: The interest expenses are decreased and the company is more stable financially because of
the reduction of the long term debt.
Continued Investments: Implementation of massive PPE investments proves that the company desires
growth, but such investments have also contributed to the higher cash outflow..(Ready Ratios, 2011).
Impact on Financial Health
a) Positive Indicators: Increasing profitability, decreasing long-term liabilities, growing equity, and
growing assets all point to total financial strength.
b) Potential Risks: The implication of the increase in current liabilities particularly the accounts
payable and short-term debt, is short-term liquidity concerns. However, strong operating cash flow
should allay these worries.
c) Liquidity:
 An increase in current assets, especially in cash, together with a steady increase in current liabilities,
indicates better liquidity. The company is much better placed to meet the short-term liabilities.
 The current ratio also decreased a bit from 2.43 in 2022 to 2.37 in 2024, although it shows that the
company has a strong liquidity.
d) Solvency:
 There is a decrease in long term debt which enhances the solvency of the company. The debt-to-
equity ratio decreased a bit from 0.83 in 2022 to 0.56 in 2024, which suggests that they have been
relying less on the debts financing.
e) Profitability:
 Total revenues have risen by 27% over three years and expenses have also risen in a similar manner.
However, net income increased from $31,000 to $39,000; and the company maintained its
profitability.
 Higher retained earnings suggest a tendency of the company to reinvest in its operations and this
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should help boost its future operations.

f) Cash Flow:
 Operating cash flow got slightly better going from $37,000 to $46,000, meaning that positive
cash flows from operating activities are generated from the company’s core operations.
 The company has spent on capital expenditure ($18,000 to $22,000), while at the same time
reducing the levels of debt, which brings about sound financial management.
 There is an enhancement of the company’s net cash position by growing from $34,000 in
2022 up to $69,000 in 2024, thereby enhancing the overall financial position of the company.

FINANCIAL ANALYSIS
1. Horizontal Analysis:
In this case, there is a comparison of the financial statement items based on the three-year plan, that is,
between the year 2022 and 2024 to know the trends.
Balance Sheet Trends (Growth from 2022 to 2024):
 Current Assets: There was an increment of 46.4 % and this was attributed to the increase in the cash
(91.2%), and accounts receivable (28.6%).
 Non-Current Assets: Went up by 14.3%, through investment in properties, plants, and equipment
(PPE) and other intangible assets.
 Current Liabilities: Went up by 50%, largely due to accounts payable (50%) and short-term debt
(50%).
 Long-term Debt: Reduced by 25% to show that debt is being repaid and therefore the company is
less reliant on debt.
 Equity: Increased by 47.6%, while the retained earnings rose by 153% indicating good profit
retention.
Income Statement Trends (Growth from 2022 to 2024):
 Sales Revenue: Went up by 27.3%, showing a consistent improvement in the top-line results.
 Cost of Goods Sold (COGS): Rising by 30.8% marginally faster than the growth in revenue which
may put pressure on the margins.
 Operating Expenses: Grew by 22.2%, which is slightly higher than the revenue growth.
 Net Income: Increased by 25.8% suggesting the company has maintained good profitability though
the growth rate is slightly slower than the revenue growth rate.
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Horizontal Analysis of Balance Sheets

As of December 31

Assets 2022 2023 2024 Change (2022- % Change

2024) (2022-2024)
Current Assets
Cash $34,000 $50,000 $65,000 $31,000 91.2%
Accounts Receivable $35,000 $40,000 $45,000 $10,000 28.6%
Inventory $28,000 $30,000 $32,000 $4,000 14.3%
Total Current Assets $97,000 $120,000 $142,000 $45,000 46.4%

Non-Current Assets
Property, Plant &
$140,000 $150,000 $160,000 $20,000 14.3%
Equipment
Intangible Assets $28,000 $30,000 $32,000 $4,000 14.3%
Total Non-Current
$168,000 $180,000 $192,000 $24,000 14.3%
Assets

Total Assets $265,000 $300,000 $334,000 $69,000 26.0%

Liabilities
Current Liabilities
Accounts Payable $20,000 $25,000 $30,000 $10,000 50.0%
Short-term Debt $12,000 $15,000 $18,000 $6,000 50.0%
Accrued Liabilities $8,000 $10,000 $12,000 $4,000 50.0%
Total Current
$40,000 $50,000 $60,000 $20,000 50.0%
Liabilities

Long-termLiabilities
Long-term Debt $80,000 $70,000 $60,000 ($20,000) -25.0%
Total Long-term
$80,000 $70,000 $60,000 ($20,000) -25.0%
Liabilities

Total Liabilities $120,000 $120,000 $120,000 $0 0.0%

Equity
Common Stock $100,000 $100,000 $100,000 $0 0.0%
Retained Earnings $45,000 $80,000 $114,000 $69,000 153.3%
Total Equity $145,000 $180,000 $214,000 $69,000 47.6%

Total Liabilities and

$265,000 $300,000 $334,000 $69,000 26.0%
Equity
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Horizontal Analysis of Income Statements

For the Year Ended December 31

Change % Change
Revenue 2022 2023 2024
(2022-2024) (2022-2024)
Sales Revenue $220,000 $250,000 $280,000 $60,000 27.3%
Total Revenue $220,000 $250,000 $280,000 $60,000 27.3%

Expenses
Cost of Goods Sold $130,000 $150,000 $170,000 $40,000 30.8%
Operating
$45,000 $50,000 $55,000
Expenses $10,000 22.2%
Interest Expense $6,000 $5,000 $4,000 ($2,000) -33.3%
Tax Expense $8,000 $10,000 $12,000 $4,000 50.0%
Total Expenses $189,000 $215,000 $241,000 $52,000 27.5%

Net Income $31,000 $35,000 $39,000 $8,000 25.8%

SIGNIFICANT CHANGES:
 Revenue Growth: 27.3% increase in the revenue clearly indicates the good sales performance.
 Debt Reduction: The decrease of long-term debt by 25% is a great advantage for financial stability.
 Retained Earnings Growth: A 153% increase in retained earnings is an indication of the
company’s capacity to preserve profits for future expansion, or pay off any form of debt.

2. Vertical Analysis:
This analysis describes the percentage of each line item to a base figure within the same year, to better
understand cost and financial structures. For the Income Statement, the base figure is Total Revenue and for
the Balance sheet, it is the Total Assets.
Income Statement (2024):
Sales Revenue (100%) as the base:
COGS: 60.7% of sales, means the gross profit margin is 39.3%.
Operating Expenses: 19.6% of sales, implies that the business has moderate operating leverage.
Net Income: 13.9% of sales, shows the net profit margin is strong.
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Balance Sheet (2024):

Current Assets: It stands at 45% of the total assets meaning that majority of the assets are liquid.
Non-current Assets: The company has a balanced asset base with the non current assets at 57.5% of total
assets.
Total Liabilities: It is at 35.9% of total assets showing relatively low leverage.
Total Equity: At 64.1% of total assets shows strong financing through equity and little dependence on debt.

Implications:
Gross Profit Margin is 39.3% which means that profitability after removing production cost is good.
The net profit margin at 13.9%, shows that the company can convert the revenue into profit.
A high equity proportion at 64.1% means the company is strong financially and it can use its asset to support
the growth more.

Vertical Analysis of Income Statements

For the Year Ended December 31

2022 % of 2023 % of 2024 % of

Revenue 2022 2023 2024
Revenue Revenue Revenue
Sales Revenue $220,000 $250,000 $280,000 100.00% 100.00% 100.00%
Total Revenue $220,000 $250,000 $280,000 100.00% 100.00% 100.00%

Expenses
Cost of Goods Sold $130,000 $150,000 $170,000 59.09% 60.00% 60.71%
Operating
$45,000 $50,000 $55,000
Expenses 20.45% 20.00% 19.64%
Interest Expense $6,000 $5,000 $4,000 2.73% 2.00% 1.43%
Tax Expense $8,000 $10,000 $12,000 3.64% 4.00% 4.29%
Total Expenses $189,000 $215,000 $241,000 85.91% 86.00% 86.07%

Net Income $31,000 $35,000 $39,000 14.09% 14.00% 13.93%

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Vertical Analysis of Balance Sheets

As of December 31

Assets 2022 2023 2024 2022 % of 2023 % of 2024 % of

Assets Assets Assets
Current Assets
Cash $34,000 $50,000 $65,000 12.83% 16.67% 19.46%
Accounts Receivable $35,000 $40,000 $45,000 13.21% 13.33% 13.47%
Inventory $28,000 $30,000 $32,000 10.57% 10.00% 9.58%
Total Current Assets $97,000 $120,000 $142,000 36.60% 40.00% 42.51%

Non-Current Assets
Property, Plant &
$140,000 $150,000 $160,000
Equipment 52.83% 50.00% 47.90%
Intangible Assets $28,000 $30,000 $32,000 10.57% 10.00% 9.58%
Total Non-Current
$168,000 $180,000 $192,000
Assets 63.40% 60.00% 57.49%

Total Assets $265,000 $300,000 $334,000 100.00% 100.00% 100.00%

Liabilities
Current Liabilities
Accounts Payable $20,000 $25,000 $30,000 7.55% 8.33% 8.98%
Short-term Debt $12,000 $15,000 $18,000 4.53% 5.00% 5.39%
Accrued Liabilities $8,000 $10,000 $12,000 3.02% 3.33% 3.59%
Total Current
$40,000 $50,000 $60,000
Liabilities 15.09% 16.67% 17.96%

Long-termLiabilities
Long-term Debt $80,000 $70,000 $60,000 30.19% 23.33% 17.96%
Total Long-term
$80,000 $70,000 $60,000
Liabilities 30.19% 23.33% 17.96%

Total Liabilities $120,000 $120,000 $120,000 45.28% 40.00% 35.93%

Equity
Common Stock $100,000 $100,000 $100,000 37.74% 33.33% 29.94%
Retained Earnings $45,000 $80,000 $114,000 16.98% 26.67% 34.13%
Total Equity $145,000 $180,000 $214,000 54.72% 60.00% 64.07%

Total Liabilities and

$265,000 $300,000 $334,000
Equity 100.00% 100.00% 100.00%
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Ratio analysis for the Company (2022-2024)

I will calculate key financial ratios across three areas: liquidity, profitability, and leverage, then evaluate
them based on industry norms. Here’s the breakdown:

1. Liquidity Ratios

a. Current Ratio = Current Assets / Current Liabilities

 2022: $97,000 / $40,000 = 2.43

 2023: $120,000 / $50,000 = 2.40
 2024: $142,000 / $60,000 = 2.37

A current ratio of greater than 2 means that the liquidity is good, meaning that the company is in a good
position to meet its short term obligations. This could be said to be a slight drop over the years, which is
still, nonetheless, well within the healthy limits. The industry standard for retail or manufacturing is between
the ranges of 1.5 to 2.5, so this company is slightly above average.(ReadyRatios, 2013)

b. Quick Ratio = (Current Assets - Inventory) / Current Liabilities

 2022: ($97,000 - $28,000) / $40,000 = 1.73

 2023: ($120,000 - $30,000) / $50,000 = 1.80
 2024: ($142,000 - $32,000) / $60,000 = 1.83

A quick ratio of greater than 1 means that the organization can pay off its short-term liability without
having to sell inventory. The quick ratios are also favorable and higher than the industry average of 1.0 to
1.2 and reveal a sound liquidity without depending on inventories(Ready Ratios, 2011)

2. Profitability Ratios

a. Gross Profit Margin = (Revenue - Cost of Goods Sold) / Revenue

This shows how well the company produces its goods.

 2022: ($220,000 - $130,000) / $220,000 = 40.91%

 2023: ($250,000 - $150,000) / $250,000 = 40.00%
 2024: ($280,000 - $170,000) / $280,000 = 39.29%

The overall gross profit margin decreases through the years, nevertheless, it is quite healthy. Therefore we
can see that this company doing pretty well in terms of production efficiency as most manufacturing and
retail companies target 30-40%.(Ready Ratios, 2011)

b. Net Profit Margin = Net Income / Revenue

This ratio reflects the company's overall profitability.

 2022: $31,000 / $220,000 = 14.09%

 2023: $35,000 / $250,000 = 14.00%
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 2024: $39,000 / $280,000 = 13.93%

The net profit margin is also reasonably good and although it has slightly declined, it remains healthy.
Typically operating margins are between 10% and 15%, so it means that this company is very profitable
when compared to similar businesses.(ReadyRatios, 2013)

c. Return on Assets (ROA) = Net Income / Total Assets

 2022: $31,000 / $265,000 = 11.70%

 2023: $35,000 / $300,000 = 11.67%
 2024: $39,000 / $334,000 = 11.68%

A stable ROA of above 10% is the signal of high operational efficiency that speaks for the company’s
ability to generate profit through efficient use of the assets (Ready Ratios, 2011b).

d. Return on Equity (ROE) = Net Income / Total Equity

This shows the return shareholders receive on their investments.

 2022: $31,000 / $145,000 = 21.38%

 2023: $35,000 / $180,000 = 19.44%
 2024: $39,000 / $214,000 = 18.22%

The ROE is still relatively high, though it decreases over the periods slightly. Significantly above industry
average of 12-15%, high ROE (above 15%) suggests efficient returns for the shareholders (Ready Ratios,
2014).

3. Leverage Ratios

a. Debt-to-Equity Ratio = Total Liabilities / Total Equity

This measures the company’s financial leverage and risk.

 2022: $120,000 / $145,000 = 0.83

 2023: $120,000 / $180,000 = 0.67
 2024: $120,000 / $214,000 = 0.56

A debt-to-equity ratio of less than 1 means that most of company funds are not financed by debt thereby
implying that the company relies little on debts. The decline in the ratio over the period shows that the
company is gradually lowering its financial leverage and turning to equity. . The industry average usually
fluctuates between 0.5 and 1.5, which means that the company has a strong and conservative capital
structure (Ready Ratios, 2018).

b. Interest Coverage Ratio = EBIT / Interest Expense

This shows how easily the company can cover its interest expenses with its earnings.

 2022: ($31,000 + $6,000 + $8,000) / $6,000 = 7.50

 2023: ($35,000 + $5,000 + $10,000) / $5,000 = 10.00
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 2024: ($39,000 + $4,000 + $12,000) / $4,000 = 13.75

The interest coverage ratio is much higher than an industry-appropriate range of 3 to 6, thus demonstrating
that the company can comfortably meet its interest liability; which improves due to the declining interest
expense.

 Liquidity: The Company has a fairly good liquidity position with current ratio and quick ratio higher
than industry norms indicating that the company is in a good position to meet short term liabilities.
 Profitability: The Company has stable and higher net profit and gross profit margin than the
industry standards. The company effectively transforms the asset (high ROA) and equity (high ROE)
into profits.
 Leverage: It has been decreasing its dependence on debt (decreasing debt to equity ratio), increasing
the interest coverage in the next years, and keeping adequate capital structure.

SUMMARY OF ANALYSIS
 Horizontal Analysis: Consistent revenue growth, and stable total profits with the most significant
decrease in interest expenses were noted (Ready Ratios, 2011a).
 Vertical Analysis: Stable gross and net margins, reduction in the use of debt and increased use of
equity which meant that the company is financially stronger.(Ross, 2015)
 Ratio Analysis: Maintained its liquidity ratios and improved its profitability, profitability margins,
and reduced leverage (debt to equity ratio).
In general, the financial condition of the company is rather healthy: the revenues and equity are increasing,
the liability is manageable and the liquidity ratio is satisfactory. However, the small decrease in profit
margins indicates that costs could still be better controlled.

APPLICATION OF DATA ANALYTICS

1. Descriptive Analytics
Summary of Financial Data and Current Performance:
 Revenue Growth: The company has shown gradual revenue growth that goes up from $220,000 in
2022 to $280,000 in 2024 (a 27.3% increase).
 Net Income Growth: Net income has grown from $31,000 to $39,000 (25.8% increase) over the
same period.
 Cash Position: The cash balance has almost doubled from $34,000 in 2022 to $65,000 in 2024, due
to the strong cash flow of operations.
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 Debt Reduction: Long term debt has been declined by 25% from $80,000 to $60,000 which
improves the company’s financial stability and reduces the interest expense.
 Equity Growth: Equity has increased by 47.6%, mainly due to a 153.3% increase in retained
earnings.
Key Performance Indicators (KPIs):
 Gross Profit Margin: 39.3% in 2024, shows the production costs is managed effectively.
 Net Profit Margin: 13.9%, shows the company can convert revenue to profit.
 Current Ratio (2024): 2.37, shows good short term liquidity.
 Debt-to-Equity Ratio (2024): 0.56, implies the financial risk is less because there is less
dependence on debt
2. Diagnostic Analytics
This step involves examining the reasons behind financial outcomes and identifying the drivers of
performance:
 Revenue Growth Drivers: The growth in the sales revenue from 27.3 % is due to expansion in
market coverage, product offerings or marketing strategies.
 Gross Profit Margin Decline: The gross profit margin declined from 40.9% in the year 2022 to
39.3% in the year 2024 means that cost of goods sold (COGS )has been increasing with a higher rate
than sales.
 Profit Margin Stability: This may be because of high raw materials cost, high labor cost or costs
associated with acquiring the supplies or inputs.
 Debt Repayment: The decrease in long term debt by 25% from 2022 to 2024 shows that the
company has tried to reduce financial risk, which was caused by increased cash flow from operations
and reduced interest expenses.

Key Drivers:
• The sales growth from new markets or products.
• The increase in costs that affects the gross profit margin.
• Effective expense management maintaining stable net profitability.
• The strategy for debt reduction improving financial health and reducing interest burden.

3. Predictive Analytics:
Historical trends are used to predict the company’s future financial conditions. The following is a
projection of key financial metrics based on past trends (assuming the growth rate is similar):
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Predictive Analytics table

2025 2026
Metric 2022 2023 2024
(forecast) (forecast)

Sales 220,000 250,000 280,000 $313,600 $351,600

Revenue

Total 189,000 215,000 241,000 $273,500 $309,400

Expenses

Net Income 31,000 35,000 39,000 $40,100 $42,200

Cash Flow 37,000 41,000 46,000 $52,000 $58,760

from
Operating
Activities
Gross
Profit 40.90% 40.00% 39.30% 39.30% 39.30%
Margin

Current
$97,000 $120,000 $142,000 $160,500 $180,800
Assets

Current 40,000 50,000 60,000 $68,000 $76,000

Liabilities

Equity 145,000 180,000 214,000 $245,000 $280,000

Explanation of Forecasts:
Gross Profit Margin: This metric has slightly fluctuated within the range of 39 to 41 percent and is
predicted to reach 39.3 % in 2026 assuming it has similar cost structure settings as earlier.
Sales Revenue, Total Expenses, and Net Income: Predictions based on the historical CAGR
(12.14% for sales, 13.14% for expenses).
Cash Flow, Current Assets, Current Liabilities, and Equity: Projections were made based on the
historical trends and business growth patterns.
This table also has the list of key financial metrics together with a more comprehensive look on the
conditions till 2026.
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4. Prescriptive Analytics

Suggested Actions to Enhance Financial Health:

Cost Management: The Company is facing an increase in COGS as a percentage of revenue at a faster rate
than the growth in its business, so management must determine what areas within supply chain or
production need significant emphasis to be optimized from cost standpoint. It could call for changes of the
supplier contracts involved, enhanced productivity or introduction of technology that will lower the overall
manufacturing cost.

Use liquidity for Growth: As the company was in a good cash position and likely possessed liquidity ratios
well beyond industry norms, this provided an opportunity for strategic investments into growth (whether
expanding product lines or customer/market segments) such as marketing & sales expansion.

Reduce Debt Further: Long-term debt has consecutively declined, which speaks well for the company. It
will further lower its future interest expenses and financial risks. If any growth opportunities come, the
company may use a reasonable amount of debt for expansion purposes, since leverage is presently too low.

• Enhancing Profitability Using Pricing Strategies: The slight decrease in the gross profit margin is a
good avenue through which the company may revisit its price strategy. Minor changes in prices or offering
of additional services may be sufficient to increase margins without an effect on demand..(Ready Ratios,
2011).

• Enhanced Utilization of Retained Earnings: The massive surge in retained earnings presents a very
healthy internal source of finance. The company can invest this money in the funding of growth through new
asset acquisitions, new market entries, or new product development.(Ready Ratios, 2011).

Summary of Data Analytics:

 Descriptive Analysis: The growth of revenue and profitability continues to increase, debt is reduced, and
liquidity remains very high.

 Diagnostic Analysis: The total amount of revenues is increasing, but the growth of COGS being much
higher than that of the revenues needs attention. Debt reduction strategies seem to pay off because this
would improve the financial stability of the firm.
 Predictive Analysis: Future projections point to a continued increase in revenue and profitability,
improvement in cash flow, with reduced levels of debt.
 Prescriptive analysis: The Company needs to expand its growth through the use of liquidity, pursue the
cost optimization plan, and also, maintain reduction on its debts.
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STRATEGIC RECOMMENDATION

Here are three strategic recommendations to fix the state of its finances and growth potential based on the
financial analysis for TechGrowth Inc. for the period from 2022 to 2024:

1. Optimize Cost of Goods Sold (COGS)

Issue: COGS have increased at a higher rate, 30.8%, compared to revenue growth, 27.3%, over three
years. This has consequently caused the gross profit margin to fall slightly from 40.9% to 39.3%.
This could put more pressure on the margins at some point if nothing is done.

Recommendation: TechGrowth needs to look at the supply chain and the manufacturing process for
avenues where costs can be saved. This might be by:
 Negotiating contracts with the suppliers for reduced price.
 Improving productivity by the procurement of new technologies.
 Using lean manufacturing principles to work out or cut down on unnecessary operations.
Justification: Through the better management of production costs, TechGrowth could increase the gross
profit margin hence increasing the level of profitability. Predictive analytics show that COGS will continue
to grow unless some adjustments are made.(Ready Ratios, 2011).
2. Deploy Liquidity for Strategic Development:
Issue: TechGrowth has great liquidity since the current ratio reached 2.37 in 2024, and the cash position has
almost doubled from $34,000 in 2022 to $65,000 in 2024. These excess liquidities should be employed more
fruitfully to drive growth (Ready Ratios, 2011).
Recommendation: Use the cash available for strategic investments like:
 New Market coverage or a new product development strategy.
 Increase market share through greater and more frequent marketing & sales promotions.
 Creating new products through research and development (R&D).
Justification: With sufficient liquidity, TechGrowth can well afford growth initiatives without setting back
its short-term liquidity position. Revenue has been projected to increase exponentially as supported by
meaningful strategies (Ready Ratios, 2011).
3. Continue Debt Reduction Strategy
Issue: In two years, the current debt has shrunk by 25%: from $80,000 in 2022 to $60,000 in 2024.
Correspondingly, the company's debt-to-equity ratio improved from 0.83 to 0.56. This reduced interest
expenses and would have set better financial stability.(Ross, 2015)
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Recommendation: Gradual long-term debt reduction should be continued, but at the same time, flexibility
should be maintained on growth opportunities. Debt may be used strategically if necessary to achieve major
growth, since its leverage is at a pretty low level.
Justification: While continuing to reduce debt, TechGrowth will further lessen interest expenses and
strengthen its balance sheet. However, possessing a healthy balance sheet it can afford to leverage up in case
of an opportunity to expand without compromising its financial health (Ready Ratios, 2024).
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Ready Ratios. (2024). Profit margin (net profit margin): calculation and benchmarking.

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Www.youtube.com. https://youtu.be/2R4EKfVw0Dw