1.Current Ratio- the current ratio is current assets divided by current liabilities. In the data from 2002 in Appendix D the current assets equal $104,296.00 and the current liabilities equal $139,017.00 the current ratio equals 0.75. 2.Long –term solvency ratio- the formula used for long term solvency is total assets divided by total liabilities. In the data provided the total assets equal $391,270.00 and the total liabilities equal $310,246.00 making the long-term solvency ratio equal 1.26 3.Contribution ratio- largest revenue source divided by total revenues. The largest revenue source in the data provided equals $617,169.00 and the total revenues equal $1,165,065.00 which brings the contribution ratio to 0.53 4.Program and expenses ratio- the formula for program and expense ratio is total program expenses divided by total expenses. 5.General and management and expenses ratio- The total general and management expenses divided by total expenses. The total general and management expenses equal $351,000.00 and the total expenses equal $1,185,008.00. The total general and management and expense ratio equals 0.30 6.Fund Raising and expense ratio- Total fund raising expenses divided by total expenses. The total find raising expenses equals $117,903.00 and the total expenses equal $1,185,008.00. The fund raising and expense ratio equals 0.1 7.Revenue and expense ratio- Total revenues divided by total expenses. The total revenue equals $1,165,065.00 and the total expenses equals $1,185,008.00.The total revenue and expense ratio equals 0.98
...FINANCIALRATIOSFinancialratios are indicators of a company’s performance as discernable from the company’s Balance Sheet and income Statement. We will discuss some of the simple ratios of a company and talk about their significance.
Liquidity Ratios: Show the company’s ability to pay of its current liabilities from its current assets.
1. Current Ratio
Current assets should be significantly higher than current liabilities so that the current ratio is higher than 2:1.
2. Quick Ratio (Acid Test Ratio)
or
Reduces the numerator of the current ratio formula by deducting Inventory (the least liquid of the current assets).
The Numerator should High enough so that the quick ratio is at least 1:1.
Asset Management Ratios: Show the company’s efficiency in using its assets in generating sales. Generally, high asset management ratios indicate high level of efficiency in utilising assets.
1. Average collection Period (ACP)
Shows the average number of days taken by the company to collect its receivables. The lower the ACP, the better.
2. Inventory Turnover Ratio (ITO)
Tells how quickly inventory is converted to sales. The higher the ITO, the better.
3. Fixed Asset Turnover (FAT)
Tells how efficiently fixed assets are used to generate sales. The...
...FINANCIALRATIOS
Gross Profit to Sales (Gross Profit Ratio): profitability ratio that shows the relationship between gross profit and total net sales revenue.
Gross margin/Net sales
The gross margin is not an exact estimate of the company's pricing strategy but it does give a good indication of financial health. Without an adequate gross margin, a company will be unable to pay its operating and other expenses and build for the future. In general, a company's gross profit margin should be stable.
Operating Expenses to sales (Operating ratio): shows the efficiency of a company’s management.
Operating expenses/Net sales
(Operating Exp=Cost of Good Sold + Total Exp – Depr – Interest)
The smaller the ratio, the greater the organization’s ability to generate profit if revenues decrease.
Net Earning to Sales (Profit margin): profitability ratio that measures how much out of every dollar of sales a company actually keeps in earnings.
Net income/Revenues or Net profits/Sales
Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20\% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.
Current Ratio: A...
...Sales OR Net income/Sales
Net Profit Margin is a ratio of profitability that measures how much out of every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
43938/528369 = 8.32%
This is above industry average of 7.23%.
Tootsie Roll’s profit margin is 8.32%, meaning the company has a net income of $.0832 for each dollar of sales.
Return on Assets:
Net Income/Total Assets
ROA is how much income is earned on each dollar invested. It will always be smallest compared to ROE & ROI. ROA is an indicator of how profitable a company is relative to its total assets, or how efficient management is at using its assets to generate earnings.
43938/857856 = 5.12%
This is below industry average of 8.15%.
Tootsie Roll’s ROA is 5.12% whereas the industry average is 8.15% meaning that Tootsie Roll needs to teach management how to make better choices to allocate its resources.
Return on Equity:
Net Income/Equity (total assets – total liabilities)
ROE is the amount of net income returned as a percentage of shareholders equity. It measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested.
When compared to ROI (return on investment) ROE cannot be below ROI; however, they can be equal if no long term debt exists. If these ratios are apparently wide...
...REPORT FINANCIALRATIOSFinancialratios are useful indicators of a firm’s performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financialratios can be used to analyze trends and to compare the firm’s financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy.
SOURCES OF DATA FOR FINANCIALRATIOS
Balance Sheet Income Statement Statement of Cash Flows Statement of Retained Earnings
PURPOSE AND TYPES OF RATIOSFinancialratios can be classified according to the information they provide. The following types of ratios frequently are used: a. b. c. d. e. Liquidity ratios Asset turnover ratiosFinancial leverage ratios Profitability ratios Dividend policy ratiosFinancialratios allow comparisons
between companies between industries between different time periods for one company between a single company and its industry average
Ratios generally are not useful unless they are benchmarked against something else, like past performance or another company. Thus, the ratios...
...University:
Professor:
Date of submission:
Introduction
Ratio analysis is a strategy used to aid in assessing the financial position of an organization. In healthcare finance, there are a lot of financialratios, which have multiple descriptions. This report focuses on roles and analysis of financialratios by category. In addition, it describes the comparison of financialratios and national norms in Baltimore hospital. Ratios used in financial conditions are primarily driven by comparative data from the organization and its competitors.
Role of financialratios
There are two principal uses of financialratios; to keep track of the hospital performance, and to make smart judgments concerning the performance of that hospital. The performance of a hospital is assessed using trend annalistic calculating the ratios on a per period basis. This also involves tracking the values over time. The analysis can be used to figure out spot trends that may be cause for alarm. These include, increasing average collection periods for receivables, or a decline in the firms liquidity position. Ratios serve as red flags for challenging issues, or as a point of reference for measurement...
...Interpreting Financial Results
FIN/571
July 22, 2013
Interpreting Financial Results
Liquidity: Current Ratio
Parrino, Kidwell, & Bates (2012) detail the current ratio as current assets divided by liabilities. The current ratio identifies a firm’s potential to pay short-term liabilities; higher liquidity is a good sign for potential creditors (Parrino et al., 2012). At the same time, however, the currentratio should not greatly exceed benchmarks of other competitors (Parrino et al., 2012). This could be indicative of mismanagement of current assets and less cash flow for investors (Parrino et al., 2012).
Current assets ($29,307,990) divided by current liabilities ($20,530,890) gives a current ratio for ABC SDN. BHD. of 1.43. American Airlines Cargo, a benchmark competitor of ABC SDN. BHD., provides current assets (in millions) of 6,838 divided by current liabilities (in millions) of 8,780; this totals to a current ratio of 0.78(AMR Corporation, 2010). Air Canada, an additional benchmark competitor, has a current ratio of current assets (in millions) of 3,445 divided by current liabilities (in millions) of 3,062 to total to a current ratio of 1.125 (Air Canada, 2010).
A benchmark analysis reveals that ABC SDN. BHD.’s current ratio is higher than other competitors. The statement of cash flows reveals a high...
...Running head: RIORDAN MANUFACTURING’S FINANCIALRATIOS
Riordan Manufacturing’s FinancialRatios
University of Phoenix
Riordan Manufacturing’s FinancialRatios
Riordan Manufacturing, a global plastics manufacturer was founded by Dr. Riordan in 1991. Today the corporation has expanded from the fan manufacturing plant in Michigan into a manufacturer employing 550 people with projected annual earnings of $46 million. Riordan’s has facilities located in America and China and the major customers are automotive parts manufacturers, aircraft manufacturers, the Department of Defense, appliance manufacturers, and beverage makers and bottlers (Apollo, 2006). In an attempt to evaluate the success of Riordan a financialratio analysis is being conducted. The financialratio analysis will provide necessary information about Riordan such as: how efficiently assets are used, the extent of reliance on debt to finance assets, the financial health, and an estimate of future earnings (Investopedia, 2009).
LIQUIDITY RATIOS: SHORT-TERM SOLVENCY
Table 1: Current Ratio
The current ratio is calculated to determine a company’s ability to meet short term debt obligations. If the current assets of a company are more than twice the current liabilities the company is considered to...
...report calculates it important financialratios to give a pitcure of its financial position in the market comparing by comaparing it to its industry average.
From Annual report of year 2011 of ITV Plc .
Financial Performance Analysis:
This section aims to reflect the financial performance of the ITV Plc by analysing a range of financialratios from the last two years. A comprehensive evaluation is provided of the significant ratios and later it is compared with its peers and sector ratios.
Liquidity Ratios
Basically the liquidity ratios are used to determine a company’s ability to cover its short term obligations when are in financial distress and these obligations are due.
Liquidity Ratios |
Ratios | Formula | 2011 | 2010 | Peer Average | Sector |
Approach 1 | | | | | |
Current Ratio | Current assets/ Current Liabilities | 1.96 | 1.93 | | 1.8x |
Quick Ratio | Cash and accounts receivables/ Current Liabilities | 1.59 | 1.61 | | 1.5x |
Approach 2 | | | | | |
Average Collection period | {Accounts receivable/ Annual credit sales}*365 | 7.5 Days | | | |
Account Receivables Turnover | | | | | 6.0x |
Inventory Turnover | Cost of goods sold / Inventory | 5.79 times | 5.72 times | | No data avaliable |...