Question

Calculate the company-AL-HASAN ENGINEERINGs (AHEC)- financial ratios that include liquidity ratio, profitability ratios,
asset (utilisation) management ratios, financial leverage ratios, and market value ratios.
Prepare comprehensive financial analysis report of the company in order to provide an insight
into its liquidity, operational efficiency, debt management and profitability over the last four
years.

Answer 1

Financial ratios	Ratio	2015	2014	2013	2012
Liquidity ratio	Current ratio = Current assets / Current liabilities	0.92	0.99	1.05	1.04
	Acid-test ratio = Current assets – Inventories / Current liabilities	0.88	0.95	0.98	0.97
	Cash ratio = Cash and Cash equivalents / Current Liabilities	0.02	0.03	0.06	0.02
	Operating cash flow ratio = Operating cash flow / Current liabilities	(0.12)	(0.003)	(0.01)	(0.12)
Profitability ratios	Gross margin ratio = Gross profit / Net sales	(0.03)	0.03	0.07	(0.01)
	Operating margin ratio = Operating income / Net sales	(0.06)	(0.01)	0.03	(0.06)
	Return on assets ratio = Net income / Total assets	(0.08)	(0.02)	0.01	(0.06)
	Return on equity ratio = Net income / Shareholder’s equity	(3.79)	(0.14)	0.05	(0.27)
Asset (utilisation) management ratios	Asset Turnover = Net Sales / Average Total Assets	0.26	0.24	0.25	0.45
	Fixed Asset Turnover = Net Sales/ Average fixed assets	2.12	1.61	1.35	2.16
Financial leverage ratios	Debt ratio = Total liabilities / Total assets	0.98	0.89	0.82	0.79
	Debt to equity ratio = Total liabilities / Shareholder’s equity	48.34	7.99	4.66	3.83
	Interest coverage ratio = Operating income / Interest expenses	(4.51)	(0.70)	1.74	(3.75)
Market value ratios	Book value per share ratio = Shareholder’s equity / Total shares outstanding	0.03	0.13	0.16	0.15
	Dividend yield ratio = Dividend per share / Share price	N/A	N/A	0.05	N/A
	Earnings per share ratio = Net earnings / Total shares outstanding	(0.11)	(0.02)	0.01	(0.04)
	Price-earnings ratio = Share price / Earnings per share	(0.92)	(5.26)	11.11	(2.00)