...Ratio Analysis Memo Principles of Accounting II ACC/291 Ratio Analysis Memo For the first ratio of solvency debt to total assets one must take the total debt Kroger owns 20,440.7 and divide it by the total assets 24,651.5. Once this is done Kroger has a debt to total assets ratio of .83, which means that 83% of Kroger's assets are financed by creditors. This is a not a good debt to assets ratio because Kroger only owns 17% of its assets out right. Kroger has a high debt to asset ratio which can be negative, but could also be less expensive then obtaining funds with equity. Carrying a high debt to assets ratio comes with risk, because the company must pay on its obligations or risk creditors seizing assets. Companies with low debt to assets ratios tend to have many shareholders that they must share profits with. The key to running a quality company is balancing that with assets to build a balanced financial backing planned for future acquisitions. Kroger's times interest earned calculation is done by taking the net income 1,496.5 plus interest expense -462 plus tax expense 793.8 which gives 1827.8 for a total. Then after this calculation is done one must divide it by the interest expense 462 which gives 3.9 for a times interest earned. The times interest earned ratio shows Kroger's ability to pay interest payments on loans when they come due. Kroger's 3.9 times interest earned ratio shows that Kroger can pay its interest 3.9 times with its income. This high number helps...
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...Ratio analysis is a means of making an analysis of a company’s financial statements. There are many different ways to go about this analysis that take into account different factors such as year to year, company to company and also the economies effect on the company. Different kinds of analyses are profitability ratios, liquidity ratios, solvency ratios, measures of managerial effectiveness, and stock market ratios. The most important of the ratios would have to be the profitability ratios. This ratio shows how profitable a company is. This is very helpful information from the stakeholders to the stockholders. Some examples in how these rations are used in the daily decision making process at different companies is they can show one year to a past year and then the company can take into account some other factors such as sales, employees, or even different times of the year to see how the numbers went up or went down. These analyses can also compare two companies that sell the same or almost the same kind of products and tell the company doing the analysis if there are any ways to improve or streamline some of their business practices to make more profit. Liquidity ratios tell a company how capable they are to pay off debts and how fast they can pay back creditors. Profitability ratios tell a company how much of a profit they are taking to the bank. Solvency ratios tell a company shows debts and investments that a company has. The limitations of ratio analysis are that the...
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...Liquidity ratios Liquidity ratios measure the ability of a company to repay its short-term debts and meet unexpected cash needs. Current ratio. The current ratio is also called the working capital ratio, as working capital is the difference between current assets and current liabilities. This ratio measures the ability of a company to pay its current obligations using current assets. The current ratio is calculated by dividing current assets by current liabilities. 20X1 20X0 Current assets $38,366 $38,294 Current liabilities 27,945 30,347 Current ratio 1.4 : 1 1.3 : 1 This ratio indicates the company has more current assets than current liabilities. Different industries have different levels of expected liquidity. Whether the ratio is considered adequate coverage depends on the type of business, the components of its current assets, and the ability of the company to generate cash from its receivables and by selling inventory. Acid-test ratio. The acid-test ratio is also called the quick ratio. Quick assets are defined as cash, marketable (or short-term) securities, and accounts receivable and notes receivable, net of the allowances for doubtful accounts. These assets are considered to be very liquid (easy to obtain cash from the assets) and therefore, available for immediate use to pay obligations. The acid-test ratio is calculated by dividing quick assets by current liabilities. ...
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...Title: The analysis of Profitability and Liquidity management of Bangladesh Steel Re-Rolling Mills Limited. (The Comparative Ratio analysis of the Financial Statement between 2011 and 2012). Abstract: Liquidity and its management determines to a great extent the growth and profitability of a firm. This is because either inadequate liquidity or excess liquidity may be injurious to the smooth operations of the organization. This seeming controversy has attracted a lot of interest in the subject of liquidity management. The present study aims to reveal the Comparative analysis of liquidity and profitability of Bangladesh Steel Re-Rolling Mills Limited so that the company has to maintain this relationship while in conducting day to day operations. The results show that there is a significant impact of only liquid ratio on ROA while insignificant on ROE and EPS; the results also show that ROE is no significant effected by three ratios current ratio, quick ratio and liquid ratio while EPS is greatly affected by current ratios, quick ratios and liquid ratio. The main results of the study demonstrate that each ratio has a significant effect on the financial positions of enterprise with differing amounts and that along with the liquidity ratios in the first place. Profitability ratios also play an important role in the financial positions of enterprises. Every stakeholder has interest in the liquidity position of a company. Suppliers of goods will check the liquidity of the company...
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...RATIO ANALYSIS. Current ratio Current ratio compares the current assets and the current liabilities in a company. The higher the ratio the better the performance. Total limited. in 2008- 1.24 in 2009-1.12 This states that total in 2008 has a higher ratio than its next year. This shows that their liability has increased. Kenya oil company limited. In 2008- 1.30 In 2009- 1.30 Here it can be stated that in both years the company drew with the ratios. Quick ratio- the best ratio is 1:1. anything below this level requires further analysis of receivables to understand how the company turns them to cash. The quick ratio for Kenya oil are closer to each other rather than total where one is higher that the other. Total 0.89 (2008) and 0.63(2009) Kenya oil 0.63(2008) and 0.62(2009). Efficiency ratios Asset turnover- this is how a company is using its assets. Total and Kenya oils liabilities are increasing faster than the assets arising therefore the ratio is falling. Both companies should control their liabilities. Inventory turn over ratio This is how fast a company sells its inventory over a financial period. The higher the ratio, the faster the turnover. This shows good company performance. Kenya oil has a better inventory turnover than Total. Since Kenya oil has a higher sales turnover volume. It takes less time to sell the oil than Total. Profitability Ratios Net Profit Ratio: The net profit ratio tells us the amount of net profit of turnover a business...
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...(max. 250 words) interpreting selected liquidity ratios. 1. Companies Last name begins with the letters o A through M: CVS o N through Z: Eli Lilly You can work individually or in a group of not more than 3. If you work in a group, one group member must send the Academic Coach, Ms. Linda Anderson, a message stating who is in the group, AND the name of the member who would submit the assignment. THE SUBMISSION FROM THE DESIGNATED MEMBER ALONE WILL BE GRADED. If your last names fall in both categories (eg. Anderson and Surysekar), your message to Ms. Anderson should also include your choice of the company (CVS or Eli Lilly). If group work, both members will get the same score for this assignment. 2. Ratios to compute and interpret (only the following 4 liquidity ratios, defined in page 704 of the text): Current ratio Current cash debt coverage ratio Inventory turnover Accounts receivable turnover 3. Time period: Years 2009, 2010, 2011 4. Source: Company Annual Report CVS o o o Reinventing Pharmacy for Better Health CVS Annual Report Pharmacy Innovation In a Changing Health Care Environment Eli Lilly o o o 2009 Annual Report 2011 Annual Report Getting There: The Lilly Promise 5. Requirements: a. Required ratios in the following table: Your name: ________________ Company name: CVS or Eli Lilly RATIO CURRENT RATIO CURRENT CASH DEBT COVERAGE RATIO INVENTORY TURNOVER ACCOUNTS RECEIVABLE TURNOVER ...
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...Performance evaluation and ratio analysis of Pharmaceutical Company in Bangladesh Faruk Hossan Md Ahsan Habib Supervisor: José Ferraz Nunes Examiner: Bengt Kjellén Master‟s thesis in international Business 15 ECTS Department of Economic and Informatics University West Spring term 2010 0 ABSTRACT The thesis applies performance evaluation of pharmaceutical company in Bangladesh. It means evaluate how well the company performs. The main aim is achieved through ratio analysis of two pharmaceutical (Beximco and Square pharmaceutical) companies in Bangladesh. The main data collection from the annual financial reports on Beximco and square pharmaceutical companies in 2007 to 2008.Different financial ratio are evaluated such liquidity ratios, asset management ratios, profitability ratios, market value ratios, debt management ratios and finally measure the best performance between two companies. The mathematical calculation was establish for ratio analysis between two companies from 2007-2008.It is most important factors for performance evaluation. The graphical analysis and comparisons are applies between two companies for measurement of all types of financial ratio analysis. Liquidity ratio is conveying the ability to repay short-term creditors and it total cash. It determines perform of short term creditor of both pharmaceutical companies under the three categories such as current ratio, quick ratio and cash ratio. Asset management ratio is measurement how to effectively...
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...[pic] (A Term Paper submitted as a partial requirement for the fulfilment of the course FB-507; Managerial Finance; in the Department of Banking, University of Dhaka) Department of Banking [pic] Ratio Analysis & Trend Analysis Submitted by Muzahidur Reza Chowdhury EMBA program, 18th batch Department of banking University of Dhaka Department of Banking [pic] Letter of Transmittal December 22, 2011 To Md. Muzahidul Islam Professor, Department of Banking, University of Dhaka. Subject: Submission of the Term Paper for course No. FB- 507, Managerial Finance. Dear Sir, With due respect, We draw your kind attention to the fact that to prepare a Term Paper and submitting the same as an academic requirement of all the EMBA students of FB- 507, Managerial Finance, Fall Semester 2011. It is a pleasure for us to present our Term Paper before you on “Ratio & Trend Analysis of Grameenphone Ltd & Teletalk Bangladesh Limited”. We have tried Our best in preparing this Term Paper and left no stone unturned to make the report a vivid and comprehensive one in spite of a number of limitations. We sincerely believe that it will serve the required purposes. We will always be obliged to furnish any clarification regarding this Term Paper, if required. Your Sincerely Muzahidur Reza Chowdhur Batch-18th CONTENTS |Acknowledgement ...
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...RATIO ANALYSIS Meaning and definition of ratio analysis: Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two variables. Significance or Importance of ratio analysis: • It helps in evaluating the firms performance: With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firm’s assets correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets • It helps in inter-firm comparison: Ratio analysis helps in inter-firm comparison by providing necessary data. An interfirm comparison indicates relative position.It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be intiated immediately to bring them in line. • It simplifies financial statement: The information given in the basic financial statements serves no useful Purpose unless it s interrupted...
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...Beximco Pharmaceuticals Ltd. (Ratio Analysis) 2009-2010 The overall purpose of financial statement analysis is to known a company’s performance to that of other in its industry. Financial ratio should be examined relative to the economy the companies industry, the companies’ main competitor and the companies past relative ratios. The specific ratios can be divided into 4 categories, depending on the purpose of the analysis: A. Profitability Ratios. B. Asset Utilization Ratios. C. Liquidity Ratios. D. Debt Utilization Ratios. E. Market Value Ratios. A. Profitability Ratios Net Income (i) Profit Margin = ------------------- X 100 Sales 1051648808 In the year 2010, The Profit Margin = ------------------- X 100 = 16.20% 6490847353 624740307 In the year 2009, The Profit Margin = ------------------ X 100 = 12.83% 4868254915 Analysis : Here, 2010 Annual year profit margin is higher than 2009 Annual year indicating that 2009 Annual year sales are too low. According to debt ratio 2009 year has a great proportion of debt than the 2010 year & the times interest earned ratio shows the 2009 year interest payments on its debt are not covered as well as the rest of 2010 Annual year. This is one of the reason that 2009 annual year profit margin...
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...CONTENTS S.No. Title Page No. | ACKNOWLDGEMENTS 3 List of Tables 4 Chapter 1. Introduction 5 1.1 Theoretical background 8 1.1.1 Use and significance of Ratio Analysis 8 1.1.2 Limitations 11 1.1.3 Classifications of ratios 13 1.2 Research Methodology 33 1.2.1 Need for the study 33 1.2.2 Scope of the study 33 1.2.3 Objectives of the study 33 1.2.4 Data sources 34 1.2.5 Limitations 34 Chapter 2. Profiles 35 2.1 Company profile 36 Chapter 3. Review of Literature 55 Chapter 4. Data Analysis 59 Chapter 5. Findings 86 Chapter 6. Suggestions 88 * Bibliography 90 LIST OF TABLES Sl. No | Table No | Title of the tables | Page No | 12345678910111213141516171819202122 | 4.14.24.34.44.54.64.74.84.94.104.114.124.134.144.154.164.174.184.194.204.214.22 | Current RatioQuick RatioCash RatioNetworking capital RatioDebt RatioDebt...
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...A Report on the Ratio Analysis of Lafarge Surma Cement Ltd. Date of submission: 18/08/2015 Course: FIN254.15 Prepared for: Ahmed Ameya Prapan Lecturer, School of Business, North South University. Prepared By: Ifraha Fairuz Binte Ilias ID# 142 0352 030 Afsara Afia ID# 142 0025 030 Asma-ul-Husna ID# 132 0374 030 Ashrafur Rahman ID# 132 0309 030 Table of Contents Title | Page No. | Introduction | 04 | Ratio Analysis | 05-39 | Time Series Analysis | 05-21 | Liquidity Ratio | 05-07 | Activity Ratio | 07-11 | Debt Ratio | 12-13 | Profitability Ratio | 14-18 | Market Ratio | 19-21 | Cross sectional Analysis | 22-38 | Liquidity Ratio | 22-23 | Activity Ratio | 24-28 | Debt Ratio | 29-30 | Profitability Ratio | 31-35 | Market Ratio | 36-38 | All over Performance at a Glance | 39 | Free Cash Flow | 40 | DuPont & Extended DuPont System | 41-42 | Conclusion | 43 | Introduction Ratio analysis is a method of analyzing data to determine the overall financial strength of a business. Ratio analysis is based on line items in financial statements like the balance sheet, income statement and cash flow statement;...
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...Ratio Analysis Solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance. Balance Sheet as of December 31, 2010 | Gary and Company | Cash | $45 | | Accounts payables | $45 | Receivables | 66 | | Notes payables | 45 | Inventory | 159 | | Other current liabilities | 21 | Marketable securities | 33 | | Total current liabilities | $111 | Total current assets | $303 | | | | Net fixed assets | 147 | | Long Term Liabilities | | Total Assets | $450 | | Long-term debt | 24 | | | Total Liabilities | $135 | | | | | | | Owners Equity | | | | Common stock | $114 | | | Retained earnings | 201 | | | Total stockholders’ equity | 315 | | | | Total liabilities and equity | $450 | Income Statement Year 2010 | | | Net sales | $795 | Cost of goods sold | 660 | Gross profit | 135 | Selling expenses | 73.5 | Depreciation | 12 | EBIT | 49.5 | Interest expense | 4.5 | EBT | 45 | Taxes (40%) | 18 | Net income | 27 | 1. Calculate the following ratios AND interpret the result against the industry average: Ratio | Your Answer | Industry Average | Your Interpretation (Good-Fair-Low-Poor) | Profit margin on sales | | 3% | | Return on assets | | 9% | | Receivable turnover | | 16X | |...
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...Application of Transmittal May 10 , 2012 Course instructor School of Business, Southeast University Subject: Letter of transmittal. Dear Sir, Please find enclosed with this letter the report of “Beximco Pharmaceuticals, Ltd” that you wanted as partial requirement for the course of “Course”. The name of my project is " Ratio Analysis of a company." I collected all the relevant information and the annual report 2001, I go through from “Beximco Pharmaceuticals, Ltd.” I thing that is the report contains the information that you need to get an idea about the “Ratio Analysis”. If you need any clarification or any further information I would be happy to provide it to you. Yours sincerely, Md. Sakhawat Hossain Acknowledgements At first our thanks go to Mr. School of Business, Southeast University, Bangladesh For handing us this report which we found to be a rather interesting topic to work on. We are going to get help to many people in the context of preparing this report and some of the persons have been very helpful and cooperative with information and suggestions. In this regard we would like to thank Mr. C.H.Rahman is the managing director of the company who is the pioneer person in the country in the Pharmaceuticals sector and I have worked hard to prepare this report. So by this way I could finish the report properly and on time. Introduction Square Pharmaceuticals Ltd. is a renowned company in Bangladesh. It is a flagship company in the pharmaceutical...
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...Financial Statement Analysis 2. Financial Statement Analysis• Assessment of the firm’s past, present and future financial conditions• Done to find firm’s financial strengths and weaknesses• Primary Tools: – Financial Statements – Comparison of financial ratios to past, industry, sector and all firms 3. Objectives of Ratio Analysis• Standardize financial information for comparisons• Evaluate current operations• Compare performance with past performance• Compare performance against other firms or industry standards• Study the efficiency of operations• Study the risk of operations 4. Uses for Ratio Analysis• Evaluate Bank Loan Applications• Evaluate Customers’ Creditworthiness• Assess Potential Merger Candidates• Analyze Internal Management Control• Analyze and Compare Investment Opportunities 5. Horizontal, Vertical, & Trend Analysis• Horizontal Analysis = calculating the Rupee change and % change in financial statement amounts across time• Vertical Analysis (Common Size Analysis) = changing all Rupee values for accounts to % values.• Trend Analysis = Using the “first” year as a base year, calculate future year Rupee values as a ratio. 6. Types of Ratios• Financial Ratios: – Liquidity Ratios • Assess ability to cover current obligations – Leverage Ratios • Assess ability to cover long term debt obligations• Operational Ratios: – Activity (Turnover) Ratios • Assess amount of activity relative to amount of resources used – Profitability Ratios • Assess profits...
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