Use the table on the next page to complete the Week Eight assignment. In this assignment, you will review the textbook to find the definitions for each ratio. Use the financial statements for Drs. Smith and Brown, located on the student website, to perform the calculations and complete the form.

Review the following example on how to perform the inventory turnover calculation, which shows you how to complete the table.

* Two different methods can determine the inventory turnover ratio.

* Cost of goods sold—operating revenue of a hospital—divided by ending inventory * Total revenues plus net nonoperating gains divided by ending inventory

This example uses the first method to perform the calculation.

Because a hospital provides a service, we would find the number that reflects services provided. Total operating revenue reflects money that is earned for providing services. Locate the Statement of Net Income on the student website. Find the total operating revenue. This is $180,000. Then, locate the ending inventory number. To find the ending Inventory, use the Balance Sheet on the student website. The ending inventory number is 5000.

Cost of goods sold—operating revenue: 180,000 divided by ending inventory of 5000; 180,000/5000 = 36

* Place this information in the table. You will do the same with the rest of the ratios. Take the result of your calculations and place in the grid, as in the example. * In addition, you are responsible for stating whether the ratios are solvency, leverage, or profitability ratios. Enter your answers in the appropriate column. Then, explain what these ratios tell us about the physician group practice.

Note. You will use the financial statements of Drs. Smith & Brown to perform the calculations on the next page. To calculate the debt service coverage ratio, you need the maximum annual debt service, which is $22,200.

...RatioAnalysisRatioanalysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratioanalysis focuses on three key aspects of a business: liquidity, profitability, and solvency.
Liquidity Ratios
Liquidityratios measure the ability of a company to repay its short‐term debts and meet unexpected cash needs.
Current ratio
The current ratio is also called the working capital ratio, as working capital is the difference between current assets and current liabilities. This ratio measures the ability of a company to pay its current obligations using current assets.
Current Ratio = Current Assets / Current Liability
Quick ratio
Current Ratio = Quick Assets / Current Liability
Inventory turnover
The inventory turnover ratio measures the number of times the company sells its inventory during the period. It is calculated by dividing the cost of goods sold by average inventory. Average inventory is calculated by adding beginning inventory and ending inventory and dividing by 2.
Inventory Turnover ratio = Cost of Goods Sold / Average inventory
Debtors...

...Financial ratioanalysis
A reading prepared by Pamela Peterson Drake
OUTLINE
1.
2.
3.
4.
5.
1.
Introduction
Liquidity ratios
Profitability ratios and activity ratios
Financial leverage ratios
Shareholder ratios
Introduction
As a manager, you may want to reward employees based on their performance. How do you know
how well they have done? How can you determine what departments or divisions have performed
well? As a lender, how do decide the borrower will be able to pay back as promised? As a manager of
a corporation how do you know when existing capacity will be exceeded and enlarged capacity will be
needed? As an investor, how do you predict how well the securities of one company will perform
relative to that of another? How can you tell whether one security is riskier than another? We can
address all of these questions through financial analysis.
Financial analysis is the selection, evaluation, and interpretation of financial data, along with other
pertinent information, to assist in investment and financial decision-making. Financial analysis may be
used internally to evaluate issues such as employee performance, the efficiency of operations, and
credit policies, and externally to evaluate potential investments and the credit-worthiness of
borrowers, among other things.
The analyst draws the financial data needed in financial...

...Financial Statement Analysis Project – “Guess, Inc.” and “The Gap”
FI 504 – Accounting and Finance: Managerial Use and Analysis
October 13, 2008
I. Liquidity Ratios
Liquidity shows the degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. Also it the ability to convert an asset to cash quickly, known as "marketability.”
For an investor it is safer to invest in liquid asset then illiquid ones because it is easier to get his money out of the investment.
Current ratio measures a company’s ability to pay short-term obligations. Both companies are able to pay back their short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. Both companies’ ratios are above one, which means they can pay off their obligations. It shows the companies are financially healthy.
Current ratio of Guess, Inc. was lower than Current ratio of The Gap during four years from 2004 to 2007, but is was stable. The Gap’s current ratio decreased slightly, it means its liquidity needs further investigation.
Investors and managers use the relationship among sales, accounts receivable, and cash collections to...

...
RATIOANALYSIS
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratioanalysis can predict future bankruptcy.
Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:
1. Liquidity ratios
2. Capital Structure and Solvency
3. Return On Investment
4. Operating Performance
5. Asset Utilization
6. Market Measures
The ratios measure the short term ability of the company to pay its current short-term liabilities.
1. Liquidity Ratio
Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.
i. Current ratio:
The current ratio is the ratio of current assets to current liabilities
The company have decreasing trend in current ratio...

...
Ratioanalysis – Shinepukur Ceramics Versus RAK Ceramics
Current ratio
Shinepukur: From 2009 to 2010, current ratio of Shinepukur has increased by 0.24 because of increase in total current assets and decrease in total current liabilities. The increase in total current has occurred for increase in accounts-and-other-receivables, advances-deposits-and-prepayments and cash. Among these elements, the increase in advances-deposits-and-prepayments is significant (from 82182270 to 278773841). On the other hand, the element that has decreased total current liabilities is long-term loan with current maturity (from 386928629 to 243718941). From 2010 to 2011, current ratio of Shinepukur has decreased by 0.14 because of decrease in total current assets and increase in total current liabilities. The decrease in total current assets has incurred for decrease in both advances-deposits-and-prepayments and cash. Among these two elements, the decrease in advances-deposits-and-prepayments is significant (from 278773841 to 112190532). And, total-current-liabilities has increased for the increase in short-term loan from bank and creditors-accruals-and-other-payables among which short-term loan from bank has played key role (from 955808744 to 1147673708). From 2011 to 2012, current liability of Shinepukur has increased by 0.03 because of more increase in total current assets and less increase in total current...

...RatioAnalysisRatioanalysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives skilled and experienced analyst a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statements.
Types of ratio’s
1. Profitability ratio
2. Leverage ratio / Capital structure ratio
3. Turn over ratio
4. Liquidity or Short term solvency ratio’s
Profitability ratio : Profitability ratio measures profitability of a concern firm or company
Net profit ratio: Net profit ratio is the ratio between net profits after taxes and net sales it indicates what portion of sales is left to the owners after operation expenses.
Net profit ratio = (Net profit after taxes / Net sales) x 100
Operating ratio: Operating ratio is the ratio between cost of goods sold plus operating expenses and the net sales
Operation ratio = {(operating expenses + cost of goods sold)/ net sales)} x 100
Cost...

...* Contents Page
1. Introduction p.g 2
2. Analysis
2.1 Liquidity p.g 2
2.2 Profitability p.g. 2
2.3 Operating Efficiency p.g. 3
2.4 Financial Stability p.g. 4
2.5 Analysing Shares as an investment p.g. 4
3. Conclusion p.g. 5
4. Recommendation p.g. 5
Introduction:
This report provides investment advice based on a financial analysis of the food manufacturing companies, Worrnambool Cheese and Butter Factory Company Holdings Ltd. (WCB) and Select Harvests Ltd. (SHV). Both companies will be evaluated by liquidity, profitability, operating efficiency, financial stability and the shares as an investment. Horizontal trends are examined across the years 2010 and 2011, both within each company and head-to-head. And then conclusions are drawn and an investment recommendation is offered based on the conducted analysis. Appendices A to E contain the detailed financial ratio and trend calculations to support the analysis.
Analysis:
Liquidity:
In 2010, the SHV current ratio (1.44) was 28% higher than WCB’s (1.09). But in 2011 WCB saw a 49% increase over the previous year in its current ratio. This resulted in WCB closing the gap between its 2011 current ratio (1.63) and that of SHV (2.00), to 23%.
SHV’s acid-test ratio, whilst still better than WCB’s, was only 8.5% and 15% in 2011 and 2010...

...RATIOANALYSIS (ALL VALUES IN Rs. MILLION)
1. GROSS PROFIT MARGIN (%):
GROSS PROFIT = NET SALES – COGS
= TOTAL REVENUE – (Employee Benefit Expense + Operating and Other Expenses + Finance Costs)
= 53107 – (22510+21598+1025) = 7974
GROSS PROFIT MARGIN = (NET SALES – COGS)/NET SALES = (7974/ 53107)*100 = 15.01497%
2. RETURN ON ASSET(RoA)
RETURN ON ASSET = (PAT/TOTAL ASSET)*100
= (4606/63454)*100 = 7.258%
This indicates that around 7.3% of all assets have been utilized by Tech Mahindra to generate revenue & profit.
3. RETURN ON SHAREHOLDER’S FUNDS(RoS)
RETURN ON SHAREHOLDER’S FUNDS = (PAT/ SHAREHOLDER’S FUNDS)*100
= (4606/34432)*100 = 13.377%
This indicates that, shareholders can expect a profitability of around 13.4% if invested in Tech Mahindra.
4. RETURN ON INVESTMENT (RoI)
CAPITAL EMPLOYED (CE) = SHARE CAPITAL + RESERVES & SURPLUS + LONG TERM LOANS – NON OPERATING ASSETS – FICTITIOUS ASSETS
= 34432 + 6000 = 40432
RETURN ON INVESTMENT = (OPBT/CE)*100
= (5790/40432)*100 = 14.32%
Where, OPBT is Operating Profit Before Tax.
This ratio gives the overall performance of the company, Tech Mahindra.
TURNOVER RATIOS:
These ratios tell the effectiveness of utilization of resources & assets in generating revenue.
5. ASSET TURNOVER RATIO
ASSET TURNOVER RATIO = NET SALES/ TOTAL ASSET = 53107/63454 = 0.837 = 4:5
This...

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