Financial Analysis for Padini Company

Topics: Financial ratios, Generally Accepted Accounting Principles, Inventory Pages: 4 (969 words) Published: October 30, 2014

Part 3 :Financial Analysis for Company –Ratio Analysis
Current year 2013 Previous year 2012
Liquidity Ratio
1.Acid Test Ratio
= Current Assets – Inventories
Current Liabilities
Acid Test Ratio
= 412439 - 143838
116618
= 2.30 : 1 Acid Test Ratio
= 380266 – 192285
120541
= 1.56 : 1
Acid Test Ratio measure the firm’s ability to repay current liabilities after the least liquid of the current assets (inventory) is deducted. The higher the ratio, the more financially secure a company in the short term. PADINI faced an increase on current assets and less inventory compared with previous year (2012) ,but in 2013, PADINI able to increase the ratio from 1.56 to 2.30 ,which is more financially secure and able to meet their current liabilities which mostly consists of trade and other payables . 2. Current Ratio

= Current Assets
Current Liabilities Current Ratio
= 412439
116618
= 3.54 : 1 Current Ratio
= 380266
120541
= 3.15 : 1
Current Ratio measures the ability of the firm to meet its short – term financial obligations. Ratio that greater than 1 is able to meet their current liabilities. The higher the current ratio, the more capable the company is to pay its liabilities. PADINI an increase much in current ratio compared to previous year 2012 which is from 3.15 to 3.54 because there reduction in short-term liabilities and faced great situation to company. Debt Management Ratio 3. Debt-to-equity Ratio

= Total Debt
Common Equity
Debt-to-equity Ratio
= 140119
372226
= 0.38
= 38% Debt-to-equity Ratio
= 145986
339413
= 0.43
= 43%
Debt-to-equity ratio the relationship between proportion of debt and shareholders’ equity and use. It to finance a company’s assets. PADINI faced decrease in ratio, from 43% to 38%. The decreasing of ratio gives more confidence to creditors which believe that they (creditors) have a protection to their money and it leads to financially stable...
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