SISON, Raphael

TAN, Liezle
YEUNG, Mark

FINANCIAL RATIO ANALYSIS OF

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY
Seagate Technology PLC is an American company that manufactures hard disk drives (HDD)

I. FINANCIAL STATEMENTS

Income Statement
Year
Total Revenue
Cost of Revenue
Gross Profit
Research and Development
Sales, General and Admin.
Non-Recurring Items
Other Operating Items
Operating Income
Add'l income/expense items
Earnings Before Interest and
Tax
Interest Expense
Earnings Before Tax
Income Tax
Minority Interest
Equity Earnings/Loss
Unconsolidated Subsidiary
Net Income-Cont. Operations
Net Income
Net Income Applicable to
Common Shareholders

2014
$13,724,000
$9,878,000
$3,846,000
$1,226,000
$722,000
$24,000
$98,000
$1,776,000
($25,000)

2013
$14,351,000
$10,411,000
$3,940,000
$1,133,000
$635,000
$2,000
$79,000
$2,091,000
($46,000)

2012
$14,939,000
$10,255,000
$4,684,000
$1,006,000
$528,000
$4,000
$38,000
$3,108,000
$15,000

2011
$10,971,000
$8,825,000
$2,146,000
$875,000
$445,000
$18,000
$2,000
$806,000
($13,000)

$1,751,000
$195,000
$1,556,000
($14,000)
$0

$2,045,000
$214,000
$1,831,000
($7,000)
$0

$3,123,000
$241,000
$2,882,000
$20,000
$0

$793,000
$214,000
$579,000
$68,000
$0

$0
$0
$0
$0
$1,570,000 $1,838,000 $2,862,000 $511,000
$1,570,000 $1,838,000 $2,862,000 $511,000
$1,570,000 $1,838,000 $2,862,000 $511,000

Balance Sheet
Year
Current Assets
Cash and Cash Equivalents
Short-Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long-Term Assets
Long-Term Investments
Fixed Assets
Goodwill
Intangible Assets
Other Assets
Deferred Asset Charges
Total Assets
Current Liabilities
Accounts Payable
Short-Term Debt / Current
Portion of Long-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Liabilities
Deferred Liability Charges
Misc. Stocks
Minority Interest
Total Liabilities
Stock Holders' Equity
Common Stocks
Capital Surplus
Retained Earnings
Treasury Stock
Other Equity
Total Equity
Total Liabilities & Equity

2014

2013

2012

2011

$2,638,000
$20,000
$1,855,000
$985,000
$279,000
$5,777,000

$1,809,000
$480,000
$1,785,000
$854,000
$484,000
$5,412,000

$1,800,000
$411,000
$2,423,000
$909,000
$767,000
$6,310,000

$2,779,000
$474,000
$1,594,000
$872,000
$706,000
$6,425,000

$0
$2,136,000
$537,000
$359,000
$184,000
$499,000
$9,492,000

$0
$2,269,000
$476,000
$405,000
$225,000
$456,000
$9,243,000

$0
$2,284,000
$463,000
$506,000
$147,000
$396,000
$10,106,000

$0
$2,245,000
$31,000
$1,000
$149,000
$374,000
$9,225,000

$2,398,000 $2,608,000 $3,396,000 $2,903,000

$0
$0
$2,398,000
$3,920,000
$342,000
$0
$0
$0
$6,660,000

$3,000
$0
$2,611,000
$2,774,000
$352,000
$0
$0
$11,000
$5,748,000

$0
$0
$3,396,000
$2,863,000
$350,000
$0
$0
$0
$6,609,000

$560,000
$0
$3,463,000
$2,952,000
$347,000
$0
$0
$0
$6,762,000

$0
$5,511,000
($2,677,000)
$0
($2,000)
$2,832,000
$9,492,000

$0
$5,286,000
($1,778,000)
$0
($13,000)
$3,495,000
$9,243,000

$0
$4,950,000
($1,444,000)
$0
($9,000)
$3,497,000
$10,106,000

$0
$3,980,000
($1,511,000)
$0
($6,000)
$2,463,000
$9,225,000

Cash Flow Statement

Year

2014
Net Income
$1,570,000
Cash Flows-Operating Activities
Depreciation
$879,000
Net Income Adjustments
$110,000
Changes in Operating Activities
Accounts Receivable
$221,000
Changes in Inventories
($20,000)
Other Operating Activities
$123,000
Liabilities
($325,000)
Net Cash Flow-Operating
$2,558,000
Cash Flows-Investing Activities
Capital Expenditures
($559,000)
Investments
$553,000
Other Investing Activities
($316,000)
Net Cash Flows-Investing
($322,000)
Cash Flows-Financing Activities
Sale and Purchase of Stock ($1,805,000)
Net Borrowings
$1,056,000
Other Financing Activities
($5,000)
Net Cash Flows-Financing
($1,311,000)
Effect of Exchange Rate
$1,000
Net Cash Flow
$926,000

2013
2012
2011
$1,838,000 $2,862,000 $511,000
$873,000
$62,000

$814,000
$10,000

$754,000
$115,000

$933,000
$102,000
($39,000)
($722,000)
$3,047,000

($906,000)
$99,000
$27,000
$356,000
$3,262,000

($263,000)
($115,000)
($32,000)
$294,000
$1,264,000

($786,000)
($17,000)
($22,000)
($825,000)

($636,000)
$62,000
($540,000)
($1,114,000)

($843,000)
($227,000)
$89,000
($981,000)

($1,395,000)
($238,000)
($71,000)
($2,222,000)
$1,000
$1,000

($2,082,000)
($670,000)
$6,000
($3,118,000)
$0
($970,000)

($739,000)
$947,000
($3,000)
$131,000
$0
$414,000

II. FINANCIAL RATIOS

Financial Ratios
Year
Liquidity Ratios
Current Ratio
Quick Ratio
Cash Ratio
Cash-Flow Liquidity Ratio
Activity Ratios
Account Receivable Turnover
Average Collection Period
Inventory Trunover
Average Sale Period
Asset Turnover
Leverage Ratios
Debt Ratio
Debt-to-Equity Ratio
Time Interest Earned Ratio
Profitability Ratios
Gross Margin
Operating Margin
Net Profit Margin
Return on Asset
Return on Equity

2014

2013

2012

2.41
2.00
1.11
2.18

2.07
1.75
0.88
2.04

1.86
1.59
0.65
1.61

7.54
47.75
10.74
1.47
34.38

6.82
52.79
11.81
1.48
30.48

7.44
48.39
11.52
1.55
31.25

0.70
2.35
9.11

0.62
1.64
9.77

0.65
1.89
12.89

0.28
0.13
0.11
0.17
0.55

0.27
0.15
0.13
0.20
0.53

0.31
0.21
0.19
0.28
0.82

III. ANALYSIS
A. LIQUIDITY RATIOS
1. Current Ratio

The current ratio of Seagate Technology in 2014 is 2.41 or 241%. This means
that for every dollar of short-term liability, the company has $2.41 worth of current assets
to meet that obligation. The current ratio increased by 0.21 in 2013 and 0.34 in 2014
based on their corresponding previous years current ratio. The increasing trend is a
relatively good indication of liquidity to pay for current liabilities.
2. Quick Ratio

The quick ratio in 2014 is 2.00 or 200%. This means that for every dollar of
short-term liability, the company has $2.00 worth of quick assets (cash, cash
equivalents, and accounts receivable) to meet that obligation. It is a more conservative
measure of short-term solvency than current ratio since it excludes the least liquid
current asset which is inventory. The quick ratio increased by 0.26 in 2013 and 0.25 in
2014. The increasing trend is a relatively good indication of immediate liquidity to pay for
current liabilities.
3. Cash Ratio

The cash ratio in 2014 is 1.11 or 111%. This means that for every dollar of shortterm liability, the company has $1.11 worth of actual cash and cash equivalents to meet
that obligation. This measure is even more conservative than quick ratio in terms of
short-term solvency. The cash ratio increased by 0.23 in both 2013 and 2014. The
increasing trend is a relatively good indication of short-term solvency especially in cases
requiring extreme liquidity.
4. Cash-flow Liquidity Ratio

The cash-flow liquidity ratio in 2014 is 2.18; this measure is almost identical with
cash ratio differing only with the addition of operating cash flow. The cash-flow liquidity
ratio increased by 0.43 in 2013 and 0.14 in 2014. Increase in 2014 is not as large as
2013 since its operating cash-flow during the said year decreased. The increasing trend
is a good indication of liquidity.

B. ACTIVITY RATIO
1. Accounts Receivable Turnover & Average Collection Period

The AR turnover in 2014 is 7.54. It decreased by 0.62 in 2013 and increased by

0.72 in 2014. The decrease in AR turnover for 2013 was caused by a decrease in sales
and increase in average accounts receivable balance. A low average collection period
is generally good since it indicates efficiency in collection. However the trend of
collection period should be decreasing and not fluctuating to ensure increasing
efficiency.
2. Inventory Turnover & Average Sale Period

The Inventory turnover in 2014 is 10.74. It increased by 0.29 in 2013 and

decreased by 1.07 in 2014. The decrease in Inventory turnover for 2014 was caused by
a decrease in cost of goods sold and increase in average inventory. A low average sale
period is generally good since it indicates efficiency in selling the companys products.
Same as collection period, the sale period should have a decreasing trend to ensure
increasing efficiency.
3. Asset Turnover

The asset turnover in 2014 is 34.38. It decreased by 0.77 in 2013 and increased
by 3.9 in 2014. A high asset turnover is good since it indicates efficiency of asset
management in generating sales. The fluctuating asset turnover is not good since it also
indicates fluctuation in efficiency.
C. LEVERAGE RATIOS
1. Debt Ratio

The debt ratio in 2014 is 0.70. It decreased by 0.03 in 2013 and increased by
0.08 in 2014. A low debt ratio is good indicator of solvency since a lower ratio indicates
lesser proportion of debt in financing assets. The companys trend ought to be

decreasing since it would indicate improving solvency and decreasing proportion of debt
in acquiring assets.
2. Debt-to-Equity Ratio

The debt-to-equity ratio in 2014 is 2.35. It decreased by 0.25 in 2013 and

increased by 0.71 in 2014. A low debt-to-equity ratio is a good indicator of solvency
since it a lower ratio indicates a lower debt in financing capital. Just like the debt ratio,
the companys trend, which showed a fluctuation, ought to be decreasing since it would
indicate improving solvency and decreasing proportion of debt in its capital.
3. Times Interest Earned Ratio

The times interest earned ratio in 2014 is 9.11. It decreased by 3.12 in 2013 and
by 0.66 in 2014. The decreases in ratio were caused by decreases in operating income
and negligible changes in interest expenses. A low ratio indicates that the operating
income is sufficient to cover interest expenses. The decreasing trend is a bad indicator
for the company since it implies a decreasing sufficiency of operating income to cover
interest expenses.
D. PROFITABILITY RATIOS
1. Gross Margin Ratio

Gross margin ratio in 2014 is 0.28. This means that for every dollar of revenue
28% of it or $0.28 is gross margin. A high gross margin ratio indicates a larger proportion
of gross margin from generated sales. The decreasing ratios of the company may be
indicative of ineffective pricing policies or inefficient production of goods.
2. Operating Margin Ratio

Operating margin ratio in 2014 is 0.13. It decreased by 0.06 in 2013 and by 0.02
in 2014. This was caused by an increase on the companys operating expenses. The
decreasing trend of the ratios may be indicative of fixed costs and other operations cost
inefficiencies which poses a bad implication on profitability.
3. Net Margin Ratio

Net margin ratio in 2014 is 0.11. It decreased by 0.06 in 2013 and by 0.02 in
2014. Just like the companys operating margin ratios, its trend is decreasing and has a
bad implication on profitability in terms of the net income relative to sales.
4. Return on Assets

ROA in 2014 is 0.17. This means that every dollar of asset returns $0.17 in net
profit. A high ROA is a good indicator of profitability since it measures the overall
efficiency of the company in managing its assets to generate profit. Its ROA decreased
by 0.08 in 2013 and by 0.03 in 2014. This decreasing trend indicates decreasing
profitability.
5. Return on Equity

ROE ratio in 2014 is 0.55. This means that for every dollar a common
stockholder invested in the company, it is able to profit 55% of it or $0.55. It decreased
by 0.29 in 2013 and increased by 0.02 in 2014. It has a net decrease of 0.27 and it
indicates decreasing profitability. This may discourage investors.