Question

Please refer to the published financial performance results of Tiger Brands for the year ending 30 September 2017. The statements are obtainable from: http://www.tigerbrands-online.co.za/results/annuals-2017/index.php

Activity: Please use 2 ratios in each category and write a comment of your opinion about the company’s performance based on that particular ratio. That is, is the performance good or bad and give reason for your answer. Exclude Economic Value Added from this exercise.

1. Liquidity Ratio

Current Ratio

- Quick Ratio

- Working Capital Ratio

2. Activity Ratio

- Accounts Receivable Turnover Ratio

- Inventory Turnover Ratio

- Asset Turnover Ratio

- Collection Period Ratio

3.Leverage Ratio

- Debt Ratio

- Interest coverage ratio

- Equity Ratio

4.Economic Indicator Ratio

- Economic Value Added

5. Profitability Ratio

- Return On Assets (ROA)

- Return On Equity (ROE)

- Return On Current Assets

- Return On Equity

- Operating Profit to Sales

Answer 1

(1): Liquidity Ratio-

Current Ratio = Current Assets / Current Liabilities

Current Ratio = 106650 / 57761

Current Ratio = 1.84

Quick Ratio = (Current Assets - Inventory) / Current Liabilities

Quick Ratio = (106650 - 48120) / 57761

Quick Ratio = 1.01

(2): Activity Ratio :

Accounts Receivable Turnover Ratio = Net Credit Sales / Average account receivables

Average receivables: (46316 + 45923) / 2 = 46119.50

Accounts Receivable Turnover Ratio = 312979 / 46119.50

Accounts Receivable Turnover Ratio = 6.78 times

Inventory Turnover Ratio = Cost of sales / Average Inventory

Average inventory: (48120+57698) /2 = 52909

Inventory Turnover Ratio = 208564 / 52909

Inventory Turnover Ratio = 3.94

(3): Leverae Ratio:

Debt Ratio = Total debt(Long term + short term borrowings) / Total assets

Debt Ratio = (20+7886) / 239792

Debt Ratio = .033

Interest coverage ratio = EBIT / Total Interest

Interest coverage ratio = 42674/ 187

Interest coverage ratio = 228.20 times

Note: (EBIT is not given so Earning befor tax has been taken in calculation)

(5): Profitability Ratio:

ROA = Net profit / Total Assets

ROA = (31380 / 239792) * 100

ROA = 13.1%

ROE = Net Profit / Shareholder's equity

ROE = 31380 / 170612

ROE = 18.39%

Conclusion- Company is doing good as its current ratio is good that says, company has good liquidity position, company's profitability is good and it has less leverage. Company's overall financial position is good.