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Calculate the following financial indicators for the last five financial years. Answers including formula to compute...

Calculate the following financial indicators for the last five financial years. Answers including formula to compute the indicators must be provided.

(i) Compounded average revenue (Sales) growth over 5 years

(ii) Compounded average net income growth over 5 years

(iii) Gross profit margin

(iv) Operating profit margin

(v) Asset turnover ratio

(vi) Return on revenue (Sales)

(vii) Return on equity

(viii) Return on total assets

(ix) Current ratio

(x) Debt ratio

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Company A Income Statement

Fiscal Year 2015 2016 2017 2018 2019
Period Ended 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 31 Dec 2019
Period Length 12 Months 12 Months 12 Months 12 Months 12 Months
Source ARS ARS ARS ARS ARS
Revenue 4,761.85 5,252.33 4,618.20 5,602.42 6,234.76
Total Revenue 4,761.85 5,252.33 4,618.20 5,602.42 6,234.76
Selling/General/Admin. Expenses, Total 328.78 326.33 346.71 376.19 471.86
Depreciation/Amortisation 75.13 68.94 76.29 74.5 136.88
Unusual Expense (Income) -4.97 -27.73 -28.09 0.75 10.31
Other Operating Expenses, Total -30.5 -27.4 -302.32 -61.46 -339.11
Total Operating Expense 3,171.85 3,600.60 2,198.29 2,416.83 2,155.93
Operating Income 1,590.01 1,651.74 2,419.91 3,185.59 4,078.84
Interest Inc.(Exp.),Net-Non-Op., Total 293.28 291.96 444.44 353.13 181.69
Other, Net -44.53 -36.79 -48.83 -30.22 -32.06
Net Income Before Taxes 1,838.76 1,906.90 2,815.53 3,508.50 4,228.47
Provision for Income Taxes 343.5 402.63 468.95 658.69 814.83
Net Income After Taxes 1,495.26 1,504.27 2,346.58 2,849.81 3,413.64
Net Income Before Extra. Items 1,065.65 1,190.34 1,569.56 1,762.49 2,135.89
Net Income 1,065.65 1,190.34 1,569.56 1,762.49 2,135.89
Income Available to Com Excl ExtraOrd 1,065.65 1,190.34 1,569.56 1,762.49 2,135.89
Income Available to Com Incl ExtraOrd 1,065.65 1,190.34 1,569.56 1,762.49 2,135.89
Diluted Net Income 1,129.43 1,254.80 1,630.46 1,836.46 2,192.02
Diluted Weighted Average Shares 4,769.84 4,766.94 4,742.10 4,705.62 5,004.08
Diluted EPS Excluding ExtraOrd Items 0.24 0.26 0.34 0.39 0.44
DPS - Common Stock Primary Issue 0.09 0.1 0.12 0.12 0.12
Diluted Normalised EPS 0.24 0.26 0.34 0.39 0.44

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Company A Balance Sheet

Fiscal Year 2015 2016 2017 2018 2019
Period Ended 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 31 Dec 2019
Source ARS ARS ARS ARS ARS
Cash 1,753.28 1,456.43 1,789.86 2,559.01 4,022.57
Short Term Investments 2,400.02 3,351.08 4,315.46 2,500.83 2,145.04
Cash and Short Term Investments 4,153.30 4,807.51 6,105.32 5,059.84 6,167.61
Accounts Receivable - Trade, Net 374.23 468.23 460.71 251.9 341.62
Total Receivables, Net 1,194.43 1,318.45 801.77 617.55 978.47
Prepaid Expenses 186.88 269.47 307.26 869.57 640.43
Other Current Assets, Total 155.61 532.76 1,120.77 770.77 1,113.42
Total Current Assets 12,626.53 11,765.26 12,312.13 12,446.27 16,624.98
Property/Plant/Equipment, Total - Gross 1,134.94 1,154.90 1,226.44 1,166.70 1,501.43
Accumulated Depreciation, Total -326.61 -373.47 -386.42 -414.05 -442.45
Property/Plant/Equipment, Total - Net 808.33 781.43 840.02 752.66 1,268.52
Goodwill, Net - - - - -
Intangibles, Net 461.06 441.84 563.3 634.72 988.08
Long Term Investments 32,613.42 31,972.30 46,684.88 49,625.58 61,728.07
Total Assets 47,052.59 45,740.77 61,539.18 64,647.56 82,345.92
Accounts Payable 167.89 155.94 271.11 221.49 282.15
Accrued Expenses 2,004.66 1,974.06 1,343.60 1,544.27 2,216.65
Notes Payable/Short Term Debt 1,762.48 710.64 1,250.63 1,729.47 2,501.03
Other Current liabilities, Total 2,488.49 3,201.23 4,507.64 4,436.10 5,978.32
Total Current Liabilities 6,930.32 7,728.40 8,861.34 9,395.32 12,427.18
Total Long Term Debt 13,841.31 12,478.95 18,955.93 20,440.49 27,461.01
Total Debt 16,110.58 14,876.11 21,694.93 23,633.95 31,411.06
Deferred Income Tax 784.7 725.21 901.23 961.01 1,462.44
Other Liabilities, Total 558.6 507.74 702.85 543.79 712.42
Total Liabilities 29,147.29 28,135.93 43,126.29 45,694.85 58,986.45
Common Stock, Total 6,309.29 6,309.50 6,309.50 6,309.50 9,327.42
Retained Earnings (Accumulated Deficit) 10,755.21 11,469.72 12,539.21 13,862.06 15,369.08
Treasury Stock - Common -72.72 -107.22 - - -
Unrealised Gain (Loss) 5.65 20.05 21.65 2.31 144.65
Other Equity, Total 907.88 -87.2 -457.46 -1,221.16 -1,481.68
Total Equity 17,905.31 17,604.85 18,412.89 18,952.71 23,359.47
Total Liabilities & Shareholders' Equity 47,052.59 45,740.77 61,539.18 64,647.56 82,345.92
Total Common Shares Outstanding 4,247.97 4,237.39 4,162.81 4,162.81 5,037.49
Tangible Book Value per Share, Common Eq 4.11 4.05 4.29 4.4 4.44

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Company A Cash Flow

Fiscal Year 2015 2016 2017 2018 2019
Period Ended 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018 31 Dec 2019
Source ARS ARS ARS ARS ARS
Net Income/Starting Line 1,495.26 1,504.27 2,346.58 2,849.81 3,413.64
Depreciation/Depletion 73.18 65.98 69.27 63.34 118.42
Non-Cash Items -391.75 -167.87 -708.12 -567.49 -844.16
Cash Taxes Paid 260.79 349.84 378.75 389.7 471.31
Changes in Working Capital 1,287.26 1,899.88 424.41 -1,799.09 -482.33
Cash from Operating Activities 2,466.65 3,305.22 2,139.16 557.74 2,224.04
Capital Expenditures -64.02 -75.94 -149.28 -89.35 -81.47
Other Investing Cash Flow Items, Total 218.1 4.56 -1,620.78 -1,266.26 -277.05
Cash from Investing Activities 154.08 -71.38 -1,770.05 -1,355.60 -358.52
Total Cash Dividends Paid -384.07 -383.03 -424.71 -504.09 -520.21
Issuance (Retirement) of Stock, Net 196.45 -56.73 0 -341.83 0
Cash from Financing Activities -1,213.12 -2,461.88 979.3 -217.11 -767
Foreign Exchange Effects 39.63 -128.63 -46.66 -59.78 -41.88
Net Change in Cash 1,447.23 643.33 1,301.75 -1,074.75 1,056.64

Solutions

Expert Solution

(i) Compounded average revenue (Sales) growth over 5 years (CAGR for revenue)-

Formula -

Answer -

(ii) Compounded average net income growth over 5 years (CAGR for net income) -

Formula - Same as used in (i) above

Answer -

(iii) Gross profit margin -

Formula -

In the given example, we do not have direct total COGS. Hence we will have to calculate the same.

2015 2016 2017 2018 2019
Gross Profit Margin 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
Part A: Computation of COGS
Total Operating Expense 3,171.85 3,600.60 2,198.29 2,416.83 2,155.93
Less:
Selling/General/Admin. Expenses, Total      328.78      326.33      346.71      376.19      471.86
Depreciation/Amortisation       75.13       68.94       76.29       74.50      136.88
Unusual Expense (Income)        -4.97      -27.73      -28.09         0.75       10.31
COGS 2,772.91 3,233.06 1,803.38 1,965.39 1,536.88
Part B: (Answer)
[(Revenue - COGS)/Revenue]*100 41.77 38.45 60.95 64.92 75.35

Notes:

  1. Other Operating Expenses, Total have been assumed to be part of COSG or operating expenses.

What does this formula tell us? -

  • By taking difference of Revenue - COGS, we arrive at gross profit/gross margin.
  • And when you divide the same by revenue, you are computing percent gross margin earned by organisation as compared to revenue.

(iv) Operating profit margin -

What is operating profit/income?

  • To calculate operating profit, we shall deduct all the non-operating expenses and incomes from the net profit.
  • Formula -

2015 2016 2017 2018 2019
Operating Margin 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
Revenue (A) 4,761.85 5,252.33 4,618.20 5,602.42 6,234.76
Operating Income (B) 1,590.01 1,651.74 2,419.91 3,185.59 4,078.84
Operating profit margin =(B/A)*100 33.39% 31.45% 52.40% 56.86% 65.42%

(v) Asset turnover ratio -

  • Asset turnover ratio is the ratio of total revenue or sales to average assets.
  • In our example we shall assume that 2015, is the first year of the company.

Formula -

Answer =

2015 2016 2017 2018 2019
31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
Revenue (A) 4,761.85 5,252.33 4,618.20 5,602.42 6,234.76
Total Closing Assets 47,052.59 45,740.77 61,539.18 64,647.56 82,345.92
Total Opening Assets 0.00 47,052.59 45,740.77 61,539.18 64,647.56
(Total Opening Assets+Total Closing Assets)/2 ___(B) 23,526.30 46,396.68 53,639.98 63,093.37 73,496.74
Asset turnover = (A/B)         0.20         0.11         0.09         0.09         0.08

(vi)  Return on revenue (Sales) -

  • It is a measure of company profitability based on the amount of revenue generated.
  • In simple words, it compares net income for every dollar of the revenue.

Answer:

2015 2016 2017 2018 2019
31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
Revenue (A) 4,761.85 5,252.33 4,618.20 5,602.42 6,234.76
Net Income before taxes (B) 1,838.76 1,906.90 2,815.53 3,508.50 4,228.47
Return on revenue (Sales) = (B/A)         0.39         0.36         0.61         0.63         0.68

(vii) Return on equity -

Formula -

Answer -

2015 2016 2017 2018 2019
31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
Net Income (A) 1,495.26 1,504.27 2,346.58 2,849.81 3,413.64
Total Equity (B) 17,905.31 17,604.85 18,412.89 18,952.71 23,359.47
Return on equity (A/B)       11.97       11.70         7.85         6.65         6.84

(viii) Return on total assets -

Formula -

Answer -

2015 2016 2017 2018 2019
31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19
EBIT (A) 1,838.76 1,906.90 2,815.53 3,508.50 4,228.47
Total Assets (B) 47,052.59 45,740.77 61,539.18 64,647.56 82,345.92
Return on total assets (A/B)         0.04
jeff jeffy answered 1 year ago
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