Ratio Analysis

1. Liquidity Ratios
Liquidity measures a company's capacity to pay its debts as they come due. There are two
ratios for evaluating liquidity.

Current Ratio
= Current Asset / Current Liabilities

=22122576/70925987

=22912156 /91140144

=20819068 /106993507

0.311

=0.2514

=0.1946

Explanation:
Current Ratio is an indication of a company's ability to meet short-term debt obligations; the
higher the ratio, the more liquid the company is. Current ratio is equal to current assets
divided by current liabilities. If the current assets of a company are more than twice the
current liabilities, then that company is generally considered to have good short-term
financial strength. If current liabilities exceed current assets, then the company may have
problems meeting its short-term obligations.

Quick Ratio
= Current Asset Inventory / Current Liabilities
2006

2007

2008

=22122576-

=22912156-3873673/91140144

=20819068-3895832 /106993507

4017865/70925987
=0.255

=0.2089

=0.1582

Explanation:
Quick ratio is a measure of a company's liquidity and ability to meet its obligations. Quick
ratio, often referred to as acid test ratio, is obtained by subtracting inventories from current
assets and then dividing by current liabilities. Quick ratio is viewed as a sign of company's
financial strength or weakness (higher number means stronger, lower number means
weaker).

2. Activity Ratios
Accounting ratios that measure a firm's ability to convert different accounts within their
balance sheets into cash or sales. Companies will typically try to turn their production into
cash or sales as fast as possible because this will generally lead to higher revenues. Such
ratios are frequently used when performing fundamental analysis on different companies.
The asset turnover ratio and inventory turnover ratio are good examples of activity ratios.

Inventory Turnover Ratio

= Cost of Services / Inventory
2006

2007

2008

=85688274/4017865

=98625812/3873673

=121658368 /3895832

=21.3268 (times)

=25.46(times)

=31.23(times)

Explanation:

The inventory turnover ratio measures the number of times a company sells its inventory
during the year. A high inventory turnover ratio indicated that the product is selling well. The
inventory turnover ratio should be done by inventory categories or by individual product.

Fixed asset to turn over Ratio

= Fixed Assets / Sales

2006

2007

2008

=184376195/103250358

=159238665/ 117336176

=159248372 / 127476192

=1.79

=1.36

=1.25

Explanation:
The Fixed Asset Turnover is similar to Total Asset Turnover, which both measure a
company's effectiveness in generating Net Sales revenue from investments back into the
company. However, the Fixed Asset Turnover ratio evaluates only the Net Property, Plant,
and Equipment investments. Manufacturing and other industries requiring majorinvestments will often spend heavily on properties, manufacturing plants, and equipment to
push them ahead of the competition. The higher the Fixed Asset Turnover ratio, the more
effective the company's investments in Net Property, Plant, and Equipment have become.
You may have to search for the explanation in the financial statements to find out what
investments were made, as large capital investment purchases may not immediately yield
higher sales. It may take a year or more for the company to fully utilize those investments. If
you can clearly see the company invested in major improvements heavily one year, it would
be wise to watch the Fixed Asset Turnover closely over the next year to see if those
investments actually helped the company.

Average Collection Period

= 360 / A/R Turnover

2006

2007

2008

=360/12.38

=360 / 13.49

=360 / 14.26

=29.06= 29 (days)

=26.69 = 27(days)

=25.24 = 25 (days)

Explanation:
It Measures the average number of days customers take to pay their bills,
indicating the effectiveness of credit and collection policies of the business. This ratio
also determines if the credit terms are realistic. The Days in the Period is the number of days
in the measurement period, normally 365. Average Accounts Receivable is the average of
the opening and closing balances of Accounts Receivable for the measurement period.

Account Receivable Turnover Ratio

= Sales / average A/R
2006

2007

2008

=103250358/8335142

=117336176 / 8698030

=127476192 / 8936690

=12.38

=13.41

=14.26

Explanation:
Accounts Receivable Turnover ratio shows the number of times accounts receivable are paid
and reestablished during the accounting period. The higher the turnover, the faster the
business is collecting its receivables and the more cash the client generally has on hand.

Operating Cycle
=Average age of Inventory + Average Collection Period

2006

2007

2008

=14+29.06

=12+26.69

=11+25.24

=43.06 (days)

=38.69(days)

=36.24(days)

Explanation:
The average time between purchasing or acquiring inventory and receiving
cash proceeds from its sale.

Average age of Inventory

=360 / inventory turn over
2006

2007

2008

=360/25.697

=360 / 30.29

=360 /32.72

=14(days)

=12(days)

=11(days)

Explanation:

Days Inventory: This ratio identifies the average length of time in days it takes
the inventory to turn over. As with inventory turnover (above), fewer days
mean that inventory is being sold more quickly.

Inventory turnover
=sale/inventory
2006

2007

2008

=103250358/4017865 = 117336176/3873673

= 127476192/3895832

=25.697

= 32.72

=30.29

Total Assets Turnover Ratio

= Sales / Total Assets
2006

2007

2008

=103250358/206498771

=117336176 / 182150821

=127476192 / 180067440

=0.50

=0.644

=0.7079

Explanation:
Net sales divided by total assets. This is a measure of how well assets are being
used to produce revenue. Also called asset turnover.

3. Debt Ratios
Debt Ratio
= Total liabilities / Total Assets
2006

2007

2008

=210814242/206498771

=216458325 / 182150821

=234772452 / 180067440

=1.02

=1.19

=1.30

Explanation:
A ratio that indicates what proportion of debt a company has relative to its assets. The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load. A debt ratio of greater than 1 indicates that a
company has more debt than assets, meanwhile, a debt ratio of less than 1 indicates that a
company has more assets than debt. Used in conjunction with other measures of financial
health, the debt ratio can help investors determine a company's level of risk.

4. Profitability Ratios
Profitability ratios measure the company's ability to generate a return on its resources. Use
the following four ratios to help your client answer the question, "Is my company as
profitable as it should be?" An increase in the ratios is viewed as a positive trend.

Gross Profit Margin

= Gross profit / Sales
2006

2007

2008

=17562084/103250358

=18710364 / 117336176

=5817824 / 127476192

=0.170

=0.1594

=.0456

Explanation:
What remains from sales after a company pays out the cost of goods sold. To obtain gross
profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.

Operating Profit or loss Ratio

=Operating profit or loss / sales

2006

2007

2008

=(3054256)/103250358

=1977069 / 117336176

=(16369942) / 127476192

=(0.029)

=.0168

=(0.1284)

Explanation:
Operating income, or operating profit, is a measurement of the money a company
generated from its own operations [it doesnt include income from investments in other
businesses, for instance]. Operating income can be used to gauge the general health of the
core business or businesses.

Net Profit or loss Ratio

= Net Profit or Loss / Sales
2006

2007

2008

=(5220357)/103250358

=(20048823) / 117336176

=(25923355) / 127476192

=(0.050)

=(0.171)

=(0.2034)

Explanation:
The net profit margin ratio is the most commonly used profit margin ratio. Low profit margin
ratios indicate that low amount of earnings, required to pay fixed costs and profits, are
generated from revenues. A low profit margin ratio indicates that the business is unable to
control its production costs. The profit margin ratio provides clues to the company's pricing,
cost structure and production efficiency. The profit margin ratio is a good ratio to
benchmark against competitors.

Return on Total Assets

= Net profit or loss / Total Assets

2006

2007

2008

=(5220357)/206498771

=(20048823) / 182150821

=(25923355) / 180067440

=(0.025)

=(0.1100)

=(0.1440)

Explanation:
ROTA. A measure of how effectively a company uses its assets.

Return on Equity
= Net Profit or loss / Common Stock Equity
2006

2007

2008

=(5220357)/46527625

=(20048823) / 988597

=(25923355) / 680337

=(0.112)

=(20.28)

=(38.10)

Explanation:
Return on Equity: This is also called return on investment (ROI). It determines the rate of
return on the invested capital. It is used to compare investment in the company against
other investment opportunities, such as stocks, real estate, savings, etc. There should be a
direct relationship between ROI and risk (i.e., the greater the risk, the higher the return).