Question

Conduct a financial analysis of your chosen company and complete the ratios listed below for 2017 AND 2016. Once you have completed the ratio’s you must interpret and comment on each of the individual ratio’s as well as the category overall, e.g. profitability. As you discuss the ratios and the categories ensure you not only comment on factors inside the firm by referring to other areas of the annual report but also external to the firm that may be impacting the ratio.

Question 1:

Liquidity Ratios

Ratio	2016	2017	Comment
Current Ratio	702,400,000 / 446,800,000 = 1.57	1,170,700,000/ 885,800,000 = 1.32
Quick Ratio	51,900,000+98,000,000          / 446,800,000 =0.34	72,800,000 + 196,600,000         / 885,800,000 = 0.30

Solvency Ratios:

Debt Ratio	587,600,000 / 992,300,000 = 0.59	1,598,800,000 / 2,452,300,000 = 0.65
Debt to Equity Ratio	587,600,000 / 404,700,000 = 1.45	1,598,800,000 / 853,500,000 = 1.87
Times Interest Earned Ratio

Profitability Ratios:

Profit Margin
Asset Turnover
Return on Total Assets
Return on Ordinary Shareholders’ Equity
Earnings per Ordinary Share (EPS)

How do I make comments on these ratios?

Answer 1

Comment is to be made by comparing two years.

Like:

Current Ratio means how much current asset compnay has to pay off its current liabilties. Higher the ratio, good for company as company will be able to pay current liabilities efficiently.

Quick Ratio means how much quick asset compnay has to pay off its current liabilties. Higher the ratio, good for company as company will be able to pay current liabilities efficiently.

Debt Ratio : It can be interpreted as the proportion of a company's assets that are financed by debt.

Debt to Equity Ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders'equity and debt used to finance a company's assets. In general, a high debt-to-equity ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations

Times Interest Earned: measure of a company's ability to honor its debt payments. Higher is favorable.

Profit Margin: What percentage of sales, Net Income is earned. Higher the better.

Asset Turnover: How much sale is being generated with one dollar of investment in Assets. Higher the better.

Return on Asset: How much Net Income is being generated with one dollar of investment in Assets. Higher the better.

Return on Equity shareholder: How much Net Income is being generated with one dollar of investment from shareholders. Higher the better.

EPS: tells earning per share outstanding. Higher the better.