Managment

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Name: Sara Kh. Mohamed
Date: 19.Feb.13

Finalcial Management Control
Asignment 1

Vodafone Ratio Analysis
What 's the concept of Ratio?
involves methods of calculating and interpreting financial ratios to analyze & monitor the firm’s performance Liquidity Ratios
The liquidity of a firm is measured by its ability to satisfy its short-term obligations as they come due. Current Ratio
A measure of liquidity calculated by dividing the firm’s current assets by its current liabilities. Generally, the higher the current ratio, the more liquid the firm is considered to be. Current ratio

=

Total current assets
Total current liabilities

1968
3877

=

1

2006

better than 2005

= 0.49
1304
2005
2672
A current ratio of 2.0 is occasionally cited as acceptable, but a value’s acceptability depends on the industry in which the firm operates & for vodafone it is not quite acceptable cuz it should have high liquidity rate due to everyday high traffic of transactions…

Quick Ratio (Acide-Test) Ratio
Quick Ratio =

1923 =
3877

0.50

2006

1280 =
2672

Current Assets - Inventory
Current Liabilities

0.48

2005

A quick ratio of 1.0 or greater is occasionally recommended, but as with the current ratio, what value is acceptable depends largely on the industry, So For VODAFONE it is not a quite perfect quick ratio neither on 2005 nor on 2006 due to the high traffic transactions of everyday they should have a higher liquidity ratio. Inventory Turnover

it measures the activity or liquidity of a firm's inventory
Inventory Turnover =

Cost of God Sold
Inventory

2299 =
45

51.1

2006

1660 =
24
As for VODAFONE the inventory turnoveris matching the industry activities

69.2

2005

Average Collection period =

$383.00 =
16.28767

23.5

2006

$364.00 =
$12.05

30.2

2005

Accout Receivable
Average Sales / day

on the average it takes the firm from 30.2 days on 2005 & 23.5 days on 2006, it's better on 23.5 days on 2006 cuz the less the collection period is the better for the company, it is better to collect money back as quicker as posible to use it in other investments

1

Finalcial Management Control
Asignment 1

Name: Sara Kh. Mohamed
Date: 19.Feb.13

Vodafone Ratio Analysis

Total Assets Turnover =

Net Sales
Total Assets

5945
3825

=

1.55

2006

Better

4398
=
1.2
2005
3654
The higher a firm’s total asset turnover, the more efficiently its assets have been used. This measure is probably of greatest interest to management because it indicates whether the firm’s operations have been financially efficient

Debt Ratio =

Total Liabilities
Total Assets

4305 =
7702

55.9

2006

4535 = 71.7
better
2005
6326
This value indicates that the company has financed 55.9 % of its assets with debt on 2006 and with 71.7 % on 2005. The higher this ratio, the greater the firm’s degree of indebtedness and the more financial leverage it has therfore 2005 was better financed

Times interest earned ratio =

EBIT
Interest
EBIT : Earnings before interest and taxes

2257 =
140

16.1

2006

1783 =
152

11.7

The Higher the better

2005

The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability to make contractual interest payments. The higher its value, the better able the firm is to fulfill its interest obligations Therfore Vodafone had more ability to fulfill its interest payments on 2006 more than 2005 cus it had a higher time interest ratio.

FPCR
Fixed Payment Coverage Ratio =

EBIT+Lease Payment
Interest + Lease Payments + {(Principle* Payments + PSD) x [1/(1-T)]}

The fixed-payment coverage ratio measures the firm’s ability to meet all fixedpayment obligations, such as loan interest and principal, lease payments, and preferred stock dividends. As is true of the times interest earned ratio, the higher this value, the better.

In the Formula T is...
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