Question

Ratios
	2018	2017	2016
Current ratio	0.83	0.86	1.07
Debt/ Equity ratio	2.43	2.43	1.50
Free cash flow	-$366,749	$5127,13	$26,459
earnings per share	-$5.72	-$11.83	-$4.68
price / earnings ratio	-58.18	-26.32	-45.66
return on equity	-21.58%	-52.88%	-16.26%
net profit margin	-4.55%	-16.67%	-9.63%
Stock data
Number of shares outstanding	171	166	144
closing price last day of December	332.8	311.35	213.69

Describe how and why each of the ratios has changed over the three-year period. For example, did the current ratio increase or decrease? Why? Describe how three of the ratios you calculated for your company compare to the general industry.

Answer 1

Current Ratio- Current ratio tells the liquidity of the company, It has decreased over a period of time. If we see, from 2016, it has decreased. It may be due to decrease in current assets or increase in current liabilities. Current ratio above 1 is good for companies. Lower ratio tells that company's liquidity position is not good.

Formula: Current ratio = Current Assets / Current Liabilities

Debt-equity ratio- This ratio tells the relationship between total liabilities and total equity in the capital structure. Lower the ratio is good. We can see that debt-equity ratio has increased that may be due to increase in long term debt or other liabilities. Higher ratio tells, company has heavy debt, more debt is not good as it brings interest burden also. Lower the ratio is good.

Formula: Debt-Equity Ratio = Total liabilities / Equity

Return on Equity- This ratio is a measure of profitability of the company. In this question, ROE is negative all the three years, that is really very bad for company. It shows, company is going through in losses and not able to give profit to shareholders.

ROE = Net profit / Equity

Net profit margin- It is also a measure of profitability. It is in negative in all the three years. Company is not able to generate profit over sales.

NPM = Net profit / Sales