Ratio Analysis Based on the Financial Information Provided (Essay Sample)

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DATE \@ "d-MMM-yy" 5-May-15
Ratio Analysis
Ratio

Result

Current Ratio

3.4

Quick Ratio

2

Receivables Turnover

9.2 times

Days' Receivables

39.67 days

Inventory Turnover

3.29 times

Days' Inventory

110.94 days

Fixed Assets Turnover

5.75 times

Total Assets Turnover

1.84 times

Times Interest Earned (TIE)

11.11 times

Debt Ratio

52%

Debt to Equity Ratio

108.33%

Equity Multiplier

2.08

Profit Margin

23.74%

Return on Assets (ROA)

43.68%

Return on Equity (ROE)

91%

Payout Ratio

25.37%

Retention Ratio

74.63%

Earnings Per Share (EPS)

$2.18

Book Value Per Share

$2.40

Price/Earnings Ratio

3.64

Market-to-Book Ratio

3.32

1 Current Ratio:
Current ratio reveals an entity’s capability of paying current liabilities utilizing the assets which are convertible to cash in a shorter time period. The ratio of 3.4 is showing that the company has $3.4 of current assets to pay the current liability of every $1.
2 Quick Ratio
Quick ratio reveals an entity’s capability of paying current liabilities through utilizing its quick assets. The ratio of 2 is showing that the company has $2 of current assets to pay the current liability of every $1.
3 Receivables Turnover
Accounts receivable turnover is an efficacy ratio also called activity ratio that evaluate how many times the accounts receivable of a company can be transformed into cash during a particular period. The ratio of 9.2 times indicates that the company turns out its accounts receivable into cash 9.2 times a year.
4 Days' Receivables
Average collection period reveals the average span of time a company waits for sale proceeds. The period 40 days on average here is shorter one, which is favorable for the company.
5 Inventory Turnover
Inventory turnover shows the inventory turns number on yearly basis. Expected to be higher here, this is not a good sign to the company. Results reveal that the company turns its inventory 3.29 times a year.
6 Days' Inventory
Days in inventory ratio reveals efficiency in the management of inventory. Days are expected to be higher here, which is not a good sign to the company. Results are not favorable to the company as it takes the inventory almost 111 to convert to sales.
7 Fixed Assets Turnover
An efficiency ratio computes the ability of a company to produce sales from its assets. Moreover, this ratio reveals how proficiently a company is using its assets to generate sales. The ratio indicates that 5.75 times the company has generated the sales for the year.
8 Total Assets Turnover
The total asset’s turnover ratio of 1.84 is revealing that each $1 asset of the company is generating about $1.84 of sales.
9 Times Interest Earned (TIE)
The TIE ratio, also called the interest coverage ratio measures the amount of income in proportion that can be utilized to deal with future interest expenses. About 11 times the income can be utilized to payoff future interest expenses.
10 Debt Ratio
A solvency ratio that evaluates the total liabilities a company’s as a percentage of the company’s total assets. It shows a company's capability of paying off liabilities by way of available assets.
The results of 52% indicate that 52% assets are attached to liabilities.
Debt to Equity Ratio
This is liquidity ratio that determines the percentage of total debt a company has to its total equity. Greater the ratio, more the creditor financing i.e. bank loans is use up than investor financing i.e. shareholders. The company has 108% debt as compared to its equities.
Equity Multiplier
It is a financial leverage ratio that rates the amount of a company’s a...