Preview

Ratio Analysis

Good Essays
Open Document
Open Document
753 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Ratio Analysis
C. OVERALL ANALYSIS OF ALL COMPANIES
LIQUIDITY: CURRENT RATIO
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. From the table it shows that Ajinomoto (M) Berhad is the highest liquidity. The ratio is 5.38, followed by Padini Holding Berhad at 2.37 and 3rd British American Tobacco with ratio at 1.91. Therefore, we can see that Ajinomoto has enough resources to pay its debt over the next 12 months.
LEVERAGE : DEBT RATIO
Debt ratio is a financial ratio that indicates the percentage of a company‘s assets that are provided via debt. Among the 6 companies, it shows that British American Tobacco has the highest debt ratio at 68.75%, followed by Nestle (M) Berhad with debt ratio at 66.88 and Maxis Berhad at 52.4%. It so called the higher the ratio, the greater risk will be associated with firm’s operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firms’ s financial flexibility.
PROFITABILITY : NET PROFIT ON SALES, RETURN ON TOTAL ASSETS, RETURN ON EQUITY AND EARNING PER SHARE
NET PROFIT ON SALES
Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. The net profits are obtained after deducting income - tax and, generally, non operating expenses and incomes are excluded from the net profits for calculating this ratio. Thus, incomes such as interest on investments outside the business, profit on sales of fixed assets, etc are excluded. Therefore, in this situation we’ve found that Maxis Berhad has the highest net profit that is 25.88%, followed by Parkson Corporation Sdn Bhd (19.60%) and British American Tobacco (18.44%). Obviously, the higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also be seen in relation to investments or capital

You May Also Find These Documents Helpful

  • Good Essays

    Ratio Analysis

    • 385 Words
    • 2 Pages

    What do the profitability ratios reveal about the financial position of the company? Which users may be interested in each type of ratio? What does the collected data reveal about the performance and position of the company?…

    • 385 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    busn 5200 week 4 homework

    • 549 Words
    • 3 Pages

    Comments on debt management- Times interest earned shows the number of times that income before interest and taxes covers the interest obligation . The higher the ration the stronger the interest paying ability of the firm .…

    • 549 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Profitability ratios measure the company 's success over a period. These ratios help investors assess the company 's ability to repay loans. Three important ratios to assess are the profit margin ratio, the gross profit rate, and…

    • 1628 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    Ratio Analysis

    • 374 Words
    • 2 Pages

    Which users may be interested in each type of ratio? Huffman Trucking are mainly suppliers, other trader creditors and staff such as:…

    • 374 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Finratios

    • 954 Words
    • 4 Pages

    * Times interest earned- a ratio that indicates how many times a company can cover its interest charges on a pre-tax basis; measure a company 's ability to meet its debt obligations. Failing to meet these obligations could force a company into bankruptcy.…

    • 954 Words
    • 4 Pages
    Powerful Essays
  • Satisfactory Essays

    Harrod S Sporting Goods

    • 36 Words
    • 3 Pages

    Profit Margin = Net Income / Sales 2007 4.524726859 4.50% Return on Assets = a) Net income ÷ Total assets 6.094252729 6.10% b)(Net income ÷ Sales) x (Sales ÷ Total Assets) 6.094252729 6.10% Return on Equity = a) Net Income/Stockholders Equity…

    • 36 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Ratio Analysis Article

    • 889 Words
    • 4 Pages

    In the evaluation of profitability ratios for 2004 the total assets were 137,598, return on assets of 1.86, and retained earnings of 72,343. For 2005 the retained earnings is 328,524 with average equity of 200,433. The return on equity is 1.28. The net income after taxes was 256,181.…

    • 889 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    The profitability ratios for this business analyse how profitable they will be after all the ratios are worked out. The gross profit margin shows that the business is selling most of their stock and receiving quite a lot of gross profit. The ratio gives a high percentage therefore the profitability of the business is better and there is more gross profit available to meet expenses as there is lower cost of sales.…

    • 922 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Fnt1 Memo Example

    • 1352 Words
    • 4 Pages

    The current ratio is an indication of a company’s ability to pay current liabilities with current assets. The formula for calculating the current ratio is current assets divided by current liabilities. DHG has a current ratio of 1.69 for year 11. When compared to the current ratio of 1.83 in year 10 and industry data quartiles of 3.1, 2.1, and 1.4 this ratio appears to be decreasing and indicates a weakness. Management should investigate ways to increase assets and reduce liabilities to improve the company’s ratio and ability to pay its liabilities.…

    • 1352 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Business: Ratio Analysis

    • 539 Words
    • 3 Pages

    Outline clearly what is meant by profitability, liquidity and efficiency as well as the meaning and…

    • 539 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Mark X Case Answers

    • 1686 Words
    • 7 Pages

    Liquidity ratio. The firm’s liquidity shows a downward trend through time. The current ratio is decreasing because the growth in current liabilities outpaces the growth of current assets. The quick ratio is also declining but not as fast as the current ratio. From 1991 to 1992, it only decreased 0.35 units while the current ratio decreased 0.93 units. Looking at the common size balance sheet, we also see that the percentage of inventory is growing from 33% to 48% indicating Mark X could not convert its inventory to cash.…

    • 1686 Words
    • 7 Pages
    Good Essays
  • Good Essays

    This ratio measures a company’s ability to pay off its debts. In addition, it also shows how many assets a business has comparing to its liabilities. The…

    • 1432 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    All the three bases are used to find the return earned with respective to sales as well as investment made. When the profit is compared with sales, it is called as the net profit margin. When the profit is compared with assets, it is called as return earned on total investment and when profit is compared with stockholders’ equity, it is called as return on equity. All these are profitability ratios and help to analyze the profitability at a particular period with respect to various bases. The trend in these ratios may not always move in the same direction. For example, return on assets may increase from one period to another, but not necessarily the return on equity. A cause for this may be due to change in capital structure and mix of debt and equity.…

    • 460 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Case 9 Thor

    • 414 Words
    • 5 Pages

    5. According to the data, Thor is managing its inventory well relative to its competition. Although they…

    • 414 Words
    • 5 Pages
    Satisfactory Essays
  • Good Essays

    Ratio Analysis-Amazon

    • 870 Words
    • 4 Pages

    Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.…

    • 870 Words
    • 4 Pages
    Good Essays