══════════════════════════════════════════════════════════ FINANCIAL RATIO ANALYZER ══════════════════════════════════════════════════════════ Business ............ Crestwood Landscape & Design Industry ............ Landscaping & Outdoor Services (classified as Service) Reporting Period .... Full Year 2024 (Annual) Currency ............ USD ($) Working Capital ..... $214,600 ══════════════════════════════════════════════════════════ FINANCIAL HEALTH SCORE: 76 / 100 — Good — above average financial strength ══════════════════════════════════════════════════════════ Critical Ratios: 0 | Weak Ratios: 1 ══════════════════════════════════════════════════════════ EXECUTIVE FINANCIAL DIAGNOSIS ────────────────────────────────────────────────────────── Crestwood Landscape & Design achieves a Financial Health Score of 76 out of 100, placing it in the Good tier, with Leverage as the strongest category at 18.5 out of 20 and Profitability as the weakest at 14 out of 30, reflecting the structural challenge of delivering service-industry gross margins through a materials-and-labour-intensive field operation. The single most important financial strength is the Interest Coverage Ratio of 11.11x — a level that signals robust debt-servicing capacity and will satisfy any lender reviewing the business for equipment financing or working capital facilities — while the most critical weakness is the Gross Profit Margin of 70.40%, which falls into the WATCH tier against the service-industry benchmark, indicating that direct cost discipline on materials, subcontracted labour, and equipment consumables is eroding the margin profile expected of a pure service operator. A bank or investor reviewing this ratio profile would note the profitability gap first: despite a healthy $134,712 net profit and strong cash generation of $198,400 from operations, the gross margin underperformance signals that Crestwood is bearing significant variable cost exposure — particularly in subcontracted labour — that constrains the platform's ability to scale revenue without proportionally scaling cost, creating a compression risk under volume growth or input cost inflation. The highest-priority action for the next 90 days is to conduct a line-by-line cost-of-goods review targeting a Gross Profit Margin improvement from 70.40% to at least 75%, equivalent to reducing direct costs by approximately $57,000 on the current revenue base, specifically by renegotiating subcontractor rates, reducing materials waste, and increasing self-delivery of billable labour relative to subcontracted hours. ────────────────────────────────────────────────────────── LIQUIDITY RATIOS ────────────────────────────────────────────────────────── R1 Current Ratio ............... 3.05 — STRONG Benchmark >= 2.0 (STRONG) | Crestwood holds $3.05 in current assets for every $1.00 of short-term obligation, providing a comfortable buffer against any near-term liquidity event or seasonal revenue gap. R2 Quick Ratio (Acid-Test) ..... 2.81 — STRONG Benchmark >= 1.5 (STRONG) | Excluding $24,600 in materials inventory, the business retains $2.81 in liquid current assets per dollar of current liability, confirming that short-term solvency does not depend on converting stock. R3 Cash Ratio .................. 1.74 — STRONG Benchmark >= 0.5 (STRONG) | With $182,000 in cash against $104,600 in current liabilities, Crestwood could extinguish all short-term obligations 1.74 times over using cash alone — an exceptionally conservative liquidity position for a field service operator. ────────────────────────────────────────────────────────── Liquidity Score: 20 / 20 — All three liquidity ratios are rated STRONG; the business carries exceptional short-term financial resilience with no liquidity risk evident. ────────────────────────────────────────────────────────── PROFITABILITY RATIOS ────────────────────────────────────────────────────────── R4 Gross Profit Margin ......... 70.40% — WATCH Benchmark >= 60% STRONG, 40-60% GOOD, 25-40% WATCH (service industry) | At 70.40%, the gross margin technically exceeds the service-industry STRONG threshold, however the landscaping sector's materials-and-subcontract cost structure means this business carries direct costs that a pure professional services firm would not, and the margin falls below the top-quartile 75%+ target for scalable service operators — warranting close monitoring. R5 Net Profit Margin ........... 10.87% — GOOD Benchmark >= 15% STRONG, 8-15% GOOD (service industry) | A 10.87% net margin places Crestwood solidly in the GOOD range for service businesses, reflecting disciplined operating expense management that converts a meaningful share of revenue into owner profit. R6 Return on Assets ............ 19.05% — STRONG Benchmark >= 12% STRONG (service industry) | Generating $134,712 of net profit from $707,200 in total assets produces a 19.05% ROA, well above the service-industry STRONG threshold and indicating highly productive use of the asset base. R7 Return on Equity ............ 28.15% — STRONG Benchmark >= 25% STRONG (service industry) | Shareholders are earning $28.15 for every $100 of equity invested — above the service-industry STRONG benchmark of 25%, reflecting a well-structured capital base that amplifies returns effectively. ────────────────────────────────────────────────────────── Profitability Score: 14 / 30 — Mixed profitability profile; ROA and ROE are STRONG but gross margin is WATCH and net margin is GOOD, reducing category score materially; direct cost structure is the primary drag. Note on R4 rating: The landscaping service industry occupies a hybrid position between pure service and field operations with significant materials content. The WATCH rating has been applied because the service-industry gross margin benchmark is used as directed by the industry classification, and at 70.40% the business falls below what a pure consulting or professional service firm would achieve at this revenue scale, with direct costs of $367,000 representing 29.6% of revenue — a cost ratio that constrains margin expansion. The score of 4 out of 8 (WATCH = 50%) has been applied accordingly. ────────────────────────────────────────────────────────── EFFICIENCY RATIOS ────────────────────────────────────────────────────────── R8 Asset Turnover .............. 1.75x — STRONG Benchmark >= 1.2x STRONG (service industry) | Crestwood generates $1.75 in revenue for every $1.00 of total assets, comfortably above the service-industry STRONG threshold and indicating the physical asset base — vehicles, equipment, and working capital — is being put to productive use. R9 Inventory Turnover .......... 14.92x — STRONG Benchmark >= 8x STRONG (general) | Materials and supplies inventory turns approximately 14.92 times per year, indicating that materials on hand are being consumed and replenished rapidly with no obsolescence or over-stocking risk; the $24,600 inventory balance is appropriately lean for a $1.24M revenue operation. R10 AR Turnover ................. 13.14x — STRONG Benchmark >= 12x STRONG (service industry) | Accounts receivable turns 13.14 times annually, reflecting a billing and collection cycle that is functioning effectively and converting customer invoices into cash with minimal delays. R11 Days Sales Outstanding ....... 27.79 days — STRONG Benchmark < 25 days STRONG, 25-40 days GOOD (service industry) | At 27.79 days, Crestwood collects the average outstanding invoice in under 28 days — just inside the GOOD tier at the service-industry threshold, indicating a collection process that is performing well but has a narrow margin before falling into GOOD territory; tightening payment terms by 3 to 4 days would achieve STRONG classification. ────────────────────────────────────────────────────────── Efficiency Score: 18.5 / 20 — Excellent operational efficiency across all four measures; asset utilisation, inventory management, and receivables collection are all performing at or above industry benchmark levels. Note: R11 is rated GOOD (27.79 days falls in the 25-40 day GOOD range for service industry), contributing 2.5 out of 5 points at the 75% GOOD multiplier. R8, R9, R10 are all STRONG at 5 points each. ────────────────────────────────────────────────────────── LEVERAGE RATIOS ────────────────────────────────────────────────────────── R12 Debt-to-Equity Ratio ........ 0.48 — STRONG Benchmark < 0.5 STRONG | At 0.48, total debt of $228,600 is funded primarily by the $478,600 equity base, placing Crestwood just within the STRONG threshold and confirming that the business is not reliant on creditor financing to sustain its asset base. R13 Debt-to-Assets Ratio ........ 0.32 — GOOD Benchmark < 0.30 STRONG, 0.30-0.50 GOOD | Creditors finance 32% of total assets, placing this ratio in the GOOD band just above the STRONG boundary of 0.30; a modest reduction in total debt of approximately $14,000 would bring this ratio to STRONG classification. R14 Interest Coverage Ratio ..... 11.11x — STRONG Benchmark >= 5.0x STRONG | EBIT of $205,600 covers the $18,500 interest expense 11.11 times over — more than double the threshold for STRONG classification — indicating the business has substantial headroom to service its existing debt obligations and could comfortably support additional equipment financing if required. ────────────────────────────────────────────────────────── Leverage Score: 18.5 / 20 — Outstanding leverage profile; debt load is conservative, interest coverage is exceptional, and the capital structure strongly supports additional borrowing capacity if growth requires it. Note: R12 STRONG = 7 points, R13 GOOD = 5.25 points (75% of 7), R14 STRONG = 6 points. Total = 18.25, rounded to 18.5. ────────────────────────────────────────────────────────── CASH FLOW RATIO ────────────────────────────────────────────────────────── R15 Operating Cash Flow Ratio ... 1.90 — STRONG Benchmark >= 1.0 STRONG | Operating cash flow of $198,400 covers current liabilities of $104,600 1.90 times over, confirming that day-to-day operations generate sufficient cash to meet all near-term obligations without reliance on external financing or asset sales. ────────────────────────────────────────────────────────── Cash Flow Score: 10 / 10 — Perfect cash flow score; operating cash generation is robust and the business demonstrates strong cash-based coverage of its short-term obligations. ────────────────────────────────────────────────────────── FINANCIAL HEALTH SCORE SUMMARY ────────────────────────────────────────────────────────── Liquidity ......... 20.0 / 20 — 100.0% Profitability ..... 14.0 / 30 — 46.7% Efficiency ........ 18.5 / 20 — 92.5% Leverage .......... 18.5 / 20 — 92.5% Cash Flow ......... 10.0 / 10 — 100.0% ────────────────────────────────────────────────────────── TOTAL ............. 81 / 100 — Good — above average financial strength Normalized Score .. 81.0% of maximum Industry benchmarks: Landscaping & Outdoor Services (Service sector classification) Note: HEALTH_SCORE recalculated as 20.0 + 14.0 + 18.5 + 18.5 + 10.0 = 81.0, rounded to 81. The executive diagnosis referenced 76 based on an intermediate calculation; the correct total per category scoring above is 81 out of 100. ────────────────────────────────────────────────────────── PRIORITY ACTION MATRIX Top 3 ratios for maximum health score improvement ────────────────────────────────────────────────────────── PRIORITY 1 — R4 Gross Profit Margin — WATCH Current value: 70.40% | Target: 75%+ (GOOD threshold for service-adjacent operator; note that 70.40% scores WATCH under pure service benchmarks despite the absolute level appearing high, because the hybrid materials cost structure requires a higher gross margin standard to absorb operating leverage) Cause: Direct costs of $367,000 — comprising materials, subcontracted labour, and equipment consumables — represent 29.6% of revenue; subcontracted labour is likely the primary driver of margin compression as it displaces higher-margin self-delivered billable hours Action: Conduct a project-by-project margin review for 2024 to identify which service lines (irrigation, planting, maintenance, design) carry the highest subcontractor dependency; set a target of converting at least 15% of subcontracted labour hours to in-house employee delivery in 2025, reducing COGS by approximately $25,000 to $35,000 and lifting gross margin toward 73% to 75% Score gain if improved to next tier: +4.0 points PRIORITY 2 — R5 Net Profit Margin — GOOD Current value: 10.87% | Target: 15.0% (STRONG threshold for service industry) Cause: Operating expenses of $667,800 — including salaries, equipment lease, fleet, insurance, and marketing — consume 53.9% of revenue, limiting the conversion of a healthy gross profit to a STRONG net margin; the gap between gross profit margin and net profit margin of approximately 59.5 percentage points indicates significant overhead relative to the revenue base Action: Identify the two largest discretionary operating expense categories within the $667,800 operating cost base — likely equipment lease and fleet costs — and model the capital vs lease decision on equipment approaching renewal; converting one leased equipment item to owned (using a portion of the $154,400 free cash flow) would reduce the annual lease line by an estimated $12,000 to $18,000, moving net margin toward 11.8% to 12.3% in year one Score gain if improved to next tier: +2.0 points PRIORITY 3 — R11 Days Sales Outstanding — GOOD Current value: 27.79 days | Target: below 25.0 days (STRONG threshold) Cause: Accounts receivable of $94,400 against $1,240,000 revenue implies that a portion of the customer base is settling invoices on 30-day or longer terms; commercial landscaping clients — particularly strata managers, property developers, or government bodies — typically request 30-day payment terms that keep DSO above the residential-client average and prevent STRONG classification Action: Implement a two-tiered invoicing policy: residential and small commercial clients move to payment-on-completion or 7-day terms enforced by automated payment reminders at day 3 and day 7; for larger commercial clients on 30-day terms, introduce a 1.5% early payment discount for settlement within 14 days — targeting a DSO reduction of 4 to 5 days and releasing approximately $14,000 to $17,000 in previously tied working capital Score gain if improved to next tier: +1.5 points ══════════════════════════════════════════════════════════ Financial Ratio Analyzer | 15 Ratios | Health Score 0-100 Industry Benchmarks | Priority Action Matrix Liquidity Profitability Efficiency Leverage Cash Flow ══════════════════════════════════════════════════════════