Tropical Hut

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WORKING CAPITAL
Working capital is a measure of liquidity of a business. It equals current assets minus current liabilities. It is a measure of both a company's efficiency and its short-term financial health. The Company’s working capital during 2011 and 2010 are -P61,608,166.00 and -P48,921,660.00 indicating that the Company’s current liabilities are more than its current assets. It tells that the company is expected to suffer from liquidity crunch in near future and that the business may not be able to pay off its current liabilities when due. (Status: Weakness of the Company)

LIQUIDITY RATIOS| | | | |
| Notes| Status| 2011| 2010|
Current Ratio| 1| Weakness| 0.83:1| 0.85:1|
Quick Ratio| 1| Weakness| 0.37:1| 0.39:1|

Liquidity ratios measure a firm’s ability to meet maturing short-term obligations. Current ratio measures the extent to which a firm can meet its short-term obligations. During 2010, the Company’s current ratio is 0.85:1 which indicates that the Company’s current assets were not enough to pay its short-term obligations. During 2011, the Company’s current ratio decreases to 0.83:1 which indicates that its ability to pay its short-term obligations became worse (see Note 1 for computation). Quick ratio measures the extent to which a firm can meet its short-term obligations without relying upon the sales of its inventories. During 2010, the Company’s quick (or acid-test) ratio is 0.39:1 which shows that its current assets less its inventory is not enough to meet its short-term obligations. During 2011, the Company’s quick ratio decreases to 0.37:1 which shows that its ability to meet its short-term obligations became worse (see Note 1 for computation). Therefore, Tropical Hut Food Market, Inc as of December 31, 2011 and 2010 is not liquid.

LEVERAGE RATIOS| | | |
| Notes| Status| Ave of 2011&2010|
Debt-to-Total-Assets Ratio| 2| Strength| 0.56|
Debt-to-Equity Ratio| 2| Weakness| 1.29|
Long-Term Debt-to-Equity Ratio| 2| Strength| 0.0007|
Times-Interest-Earned Ratio| 2| Weakness| -19.36|

Leverage ratios measure the extent to which a firm has been financed by debt. Debt-to-Total-Assets Ratio is the percentage of total funds that are provided by creditors. The average Debt-to-Total-Assets Ratio during 2011 and 2010 is 56% (or 0.56:1) which indicates that the Company is capable to meet outside obligations in full out of its own assets (see Note 2 for computation). Debt-to-Equity Ratio is the percentage of total funds provided by the creditors versus by owners. The average Debt-to-Equity Ratio during 2011 and 2010 is 129% (1.29:1). This means that for every peso of the company owned by the shareholders, the company owed 1.29 to creditors. This high debt-to-equity ratio indicates that the Company was not able to generate enough cash to satisfy its debt obligations (see Note 2 for computation). Long-Term Debt-to-Equity Ratio is the balance between debt and equity in a firm’s long-term capital structure. It expresses the degree of protection provided by the owners for the long-term creditors. The average Long-Term Debt-to-Equity Ratio during 2011 and 2010 is .07% (or 0.0007:1) which indicates that the Company’s degree of leverage is low (see Note 2 for computation). Times-Interest-Earned Ratio is the extent to which earnings can decline without the firm becoming unable to meet its annual interest costs. The Company’s Times-Interest-Earned Ratio is -19.36 due to consecutive years of net loss which indicates that the Company was not able to meet its annual interest costs.

ACTIVITY RATIOS| | | |
| Notes| Status| 2011| 2010|
Inventory Turnover| 3| Weakness| 8.08 | 9.38| Fixed Assets Turnover| 3| Strength| 10.88| 10.19|
Total Asset Turnover| 3| Weakness| 3.06| 3.32|
Accounts Receivable Turnover| 3| Strength| 77.43| 64.01| Average Collection Period| 3| Strength| 4.71| 5.70|

Activity ratios...
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