A time series analysis of RadioShack net fixed assets reveals that it has been on a declining trend from the initial year to the final year. Long term debt on the other hand does not exhibit any particularly discernible trend. There is a 47.5% rise in the long term debt from the year 2007 to 2008, then an 8.1% dip from year 2008 to 2009. A further 52.9% drop in long term debt occurs from 2009 to 2010. This is there after followed by a 49.5% increase again up to the final year 2011.

The observation that can be made from these two sets of net fixed asset and long term debt data obtained from the RadioShack balance sheet is that all of increases in their long term liabilities, in each of the time frames they have occurred, could not have been directed towards obtaining more fixed assets. The total current assets trend is of a three year on year rise then is followed by a two year decline. Cash has also increased progressively during the three initial years only to drop again in the final two years.

Total current liabilities have generally been on a steady trend having peaked significantly in the year 2010. This can be taken to mean that RadioShack generally has used long-term finances even for its current assets which can be taken as an indication of higher liquidity for the organization. From the balance sheet, it can also be deduced that RadioShack's working capital was on the rise from 2007 until 2009, falling off marginally in 2010 then again rising in 2011. It is important to point out here that increase or decrease in working capital affects the liquidity of any business.

It is generally accepted accounting fact that a current ratio of two as a good value. The current ratio RadioShack has for the period under discussion averaged two or slightly above which points to the strength of RadioShack working capital and also means that the business had enough current assets to meet the payment schedule of current liabilities with a margin of safety for the period under consideration.

A calculation and analysis of the business' quick ratio over the financial period between 2007 and 2011 also show that it has been able to offset its current liabilities without necessarily depending on immediate revenues accrued from actual business operations or in other words, sales. RadioShack is not stretching beyond its capability of repaying which would then mean greater creditor claim over the business assets

The business has been in a good position of solvency posting positive debt ratios over the five year period meaning that RadioShack did not rely heavily on debt financing but more from owners' equity. RadioShack has never provided any reserves and the balance sheet does not give any indication of surpluses. In general the overall business position of RadioShack can be said to have been satisfactory for the trading period presented in the balance sheets

Feb 9, 2018 in Analysis Category