Question

THE COMPANY IS << PUMA>>

need written paper SHOULD BE IN "" WORD"   would expect the paper to be about 1500 words.  Your paper should describe your company and its background. You should include the balance sheet (BS) & income statement (IS) for each of the two years. You should show the calculation for each ratio using the data from the BS & IS. You should provide a discussion about how the ratio changed over the two years and your insights into what the ratio means in terms of the financial health of the firm

SHORT TERM SOLVENCY 2016 2017 2016 2017

A. Current Ratio= Current Assets/Current Liabilities 1.977874623 1.773584906 Total Assets 2,780,000,000 2,870,000,000

B. Quick Ratio= Current Assets - Inventory/ Current Liabilities 1.174544642 1.039150943 Total Equity 1,720,000,000 1,660,000,000

LONG TERM SOLVENCY C O G S 2,030,000,000 2,250,000,000

A. Total Debt Ratio= Total Assets - Total Equity/ Total Assets 0.381294964 0.4216027875

Inventory 718,900,000 778,500,000

ASSET MANAGEMENT

A. Inventory Turn Over= Cost of Goods Sold/ Inventory 2.82375852 2.89017341 Net Income 62,400,000 135,800,000

PROFITABILITY RATIOS Shares Out 14,940,000 14,940,000

A. Profit Margin= Net Income/ Sales 0.01719008264 0.03280193237

Price Per 161.5 245

B. Return of Assets= Net Income/ Total Assets 0.02244604317 0.04731707317

Earning Per 1.8 10.33

C. Return on Equity= Net Income/ Total Equity 0.03627906977 0.08180722892

Sales 3,630,000,000 4,140,000,000

MARKET VALUE RATIOS

A. Earning Per Share= Net Income/ Shares Outstanding 4.176706827 9.089692102

B. Price Earning Ration= Price Per Share/ Earning Per Share 89.72222222 23.71732817

Answer 1

SHORT TERM SOLVENCY

A.     Current Ratio

Analysis: -Here Company’s Current ratio in the year 2017 is 1.77 against 1.98 in 2016.It indicates reduction of 0.21 time in current assets and current liabilities. it is assumed that higher the ratio, higher is the liquidity and vice versa. Current Ratio Ideal ratio: 2:1 High ratio indicates under trading and over capitalization. Low ratio indicates over trading and under capitalization.

B.     Quick Ratio or Acid Test Ratio

Analysis: -The ideal ratio is 1:1 Usually, a high acid test ratio is an indication that the firm is liquid and has ability to meet its current or liquid liabilities in time and on the other hand a low quick ratio represents that the firm’s liquidity position is not good. It is a refinement to current ratio and second testing device for working capital. Here even though companies quick ration came down to 1.04 in the year 2017 but still in good position only.

LONG TERM SOLVENCY

A.     Total Debt Ratio

       Analysis: -The debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage. It can be interpreted as the proportion of a company’s assets that are financed by debt. A lower debt ratio usually implies a more stable business with the potential of longevity because a company with lower ratio also has lower overall debt. Each industry has its own benchmarks for debt, but .5 is reasonable ratio. A debt ratio of .5 is often considered to be less risky. This means that the company has twice as many assets as liabilities. Or said a different way, this company’s liabilities are only 50 percent of its total assets. Essentially, only its creditors own half of the company’s assets and the shareholders own the remainder of the assets. Even though company debt ratio reduced to 0.42 in the year 2017, indicates 2.38 times company has assets over liability

ASSET MANAGEMENT

A.     Inventory Turn Over Ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by comparing cost of goods sold with average inventory for a period. This measures how many times average inventory is “turned” or sold during a period. In other words, it measures how many times a company sold its total average inventory dollar amount during the year.

The ideal ratio is 2 This ratio establishes the relationship between the cost of goods sold during a given period and the average stock holding during that period. It tells us as to how many times stock has turned over (sold) during the period. Indicates operational and marketing efficiency. Helps in evaluating inventory policy to avoid over stocking. Here company ration increase to 2.89 time which means there is a chances of overstocking.

PROFITABILITY RATIOS

A.     Profit Margin

Profit Ratio Higher the ratio better is the profitability Net profit after taxes Net profit ratio= X 100 Net sales It expresses the relationship between net profit after taxes to sales. Measure of overall profitability useful to investors, as it gives an idea of the efficiency as well as profitability of the business to a limited extent.

Here company profit margin increased to 0.0328 from 0.017indicates favourable investment opportunity to the company

B.     Return of Assets

This ratio acts as a yardstick to assess the efficiency of the efficiency of the operations of the business as it indicates the extent to which assets employed in the business are utilised to results in net profit. The higher the ratio indicates favourable condition to company. The company has improved in the year 2017 compared to 2016

C.     Return on Equity

This ratio establishes the relationship between net profit available to equity shareholders and the amount of capital invested by them. It is used to compare the performance of company's equity capital with those of other companies, and thus help the investor in choosing a company with higher return on equity capital.

MARKET VALUE RATIOS

A.     Earnings Per Share

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Here company EPS is 9.089 against 4.176 in the last year.

B.     Price Earnings Ratio

The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stock price and earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the company.In this situation company PE reduced to 23.717. Companies with a low Price Earnings Ratio are often considered to be value stocks. It means they are undervalued because their stock price trade lower relative to its fundamentals. This mispricing will be a great bargain and will prompt investors to buy the stock before the market corrects it. And when it does, investors make a profit as a result of a higher stock price. Examples of low P/E stocks can be found in mature industries that pay a steady rate of dividends.