Memorandum

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STRONG-TIE LTD
MEMO
Liquidity
The liquidity of the company can be measured using the Current ratio= Current Assets/ Current Liabilities. The current ratio of Strong-Tie Ltd is 2006 was 5.0, 4.2 in 2007 and 3.1 in 2008. This can be a worrying trend because the ratio is decreasing yearly, but it can it also be good in that the company is using its current assets to pay for the short-term debts and is not risking bankruptcy.
Asset Management
Asset management is how the company controls it cash, manages the opportunities and risks to maintain a healthy asset base. The asset management of Strong Tie Ltd can be analyzed using its asset turnover ratio which shows how the company is using its assets to generate income. Asset turnover= Sales / Total assets. In 2006 the turnover over was 1.41, there was no change in the value in 2007 and 1.31 in 2008. Despite the decrease in 2008, the trend is steady, and this shows Strong Tie Ltd has good asset management.
Profitability
The profitability of the company can be assessed using the profit margin which indicates the capability of earning profits. The profit margin in 2006 was 0.09, 0.05 in 2007 and 0.0004 in 2008; this trend shows a major decline in 2008 because of the decrease in net income.
Long-term debt ability
The long-term debt ability of Strong Tie Ltd can be assessed using the debt ratio which indicates the company’s capability of paying its long-term debts. The debt ratio in 2006 was 0.

28, 0.28 again in 2007 and 0.69 in 2008. This show that company will be in position to pay its long-term debtsRecommendations
The company should work on increasing its working capital so that it can increase the net income and its profitability. The primary cause of the decline in performance in 2008 is the decrease in the net income and the current assets. The company should focus on improving these if it wants to regain stability.