Financial Analysis

Case Study

Year 1995 Year 1996 Year 1997 Year 1998 Year 1999 Year 2000
1 The Liquidity ratios :

* Current ratio = Current assets #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Current Liabilities

* Quick ratio = Current assets - Inv. #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Current Liabilities

The Liquidity ratios shows the ability of the Co. to cover its short term liabilities

2 The Activity ratios :

* Inventory turnover = Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Inventory

* F.A. turnover = Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

net F.A.

* Total Assets turnover = Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total assets

In general the Activity ratios gives a better indication of the Co. situation year on year

3 The Leverage ratio :

* Indebtedness ratio = Total Lib. #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Equity

Shows the companies dept capacity and financial resources

4 The Profitability ratios :

* Profit margin over sales = Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Sales

* Return on total assets = Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total assets

* Return on equity = Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Comm. Equity

Shows how profitable the firm is

General Comment
Ratios are useful, they give you guidelines to identify the problem, but never offer you the solution