Ratio Analysis. Using the 2000 Enron 10-K, calculate 2 years of the following liquidity, solvency and profitability ratios. Include your calculations and analysis for these ratios and what they tell you about the company.

                        Liquidity: Current ratio, Accounts receivable turnover

Solvency: Debt to assets ratio, Times interest earned

Profitability: Profit margin, Earnings per share 

Current Ratio - 1.07 in 1999 and 1.07 in 2000

A good current ratio is between 1.2 to 2, which means that Enron has 2 times more current assets than liabilities to covers its debts.

Accounts Receivable Turnover - 27.95 in 1999 and 38.16 in 2000

Low ratio suggests that Enron did not follow a conservative credit policy such as net-20-days or even a net-10-days policy.

Debt to Assets Ratio - 0.53 in 1999 and 0.74 in 2000

From a pure risk perspective, debt to assets ratio of 0.4 or lower are considered better compared to a debt to assets ratio of 0.6 or higher which makes it more difficult to borrow money.

Times interest Earned - 2.79 in 1999 and 2.77 in 2000

From an investor or creditor's perspective, the times interest earned ratio of 1999 and 2000 are favorable since greater than 2.5 is considered an acceptable risk. It means that Enron presents less of a risk to investors and creditors in terms of solvency.

Profit margin - 2.23% in 1999 and 0.97% in 2000

"As a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high (or "good"), and a 5% margin is low." Therefore, the profit margin from 1999 to 2000 are considered low.

Earnings per share - 3.83 in 1999 and 4.38 in 2000

EPS from 1999 to 2000 accelerated is considered better which suggested that Enron has products or services in strong demand.