ST.

PAUL UNIVERSITY SURIGAO

Surigao City, Philippines

CHAPTER 4
RESULTS AND DISCUSSIONS

This chapter presents the result and discussions of the data gathered in this study.

Business Profile

The profile of Nine O’ One Paint Center& Enterprises in Surigao City in terms of

beginning capital, numbers of employees and number of years in operation were present in table

1.Table1 Business Profile

Nine O’One Paint Center& Enterprises in Surigao City

Beginning Capital P 1,200,000

Number of Employees 5

Number of Years in Operation 3

The data in table 1 shows the business profile of Nine O’One Paint Center & Enterprises

in Surigao City.

It can be gleaned in table 1 that the beginning capital of Nine O’One Paint Center&

Enterprises was P 1,200,000. As to the number of employees, it had 5 employees.

As to the number of years in operation, the business had been existing for 3 years. It

indicates that the longer the number of years in operation, the bigger capitalization and the

better is the availability of resources and adequate funds.

 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

20

Financial Ratio Analysis

LIQUIDITY RATIO

The table 2 shows the result of financial ratio as to liquidity ratio that affects

decision of Nine O’One Paint Center& Enterprises owner in Rizal St. Surigao City.

Table 2 Liquidity Ratios

RATIOS 2016 2015 2014

LIQUIDITY RATIO

Current Ratio 2.14:1 8.43:1 6.89:1

Quick Ratio 0.90:1 3.03:1 3.76:1

Net Working Capital 575,866 1,402,786 1,179,780

Inventory Turnover 0.92 4.24 5.55

Source:
Suralta (2017) – Current Ratio
Murray(2017) – Quick Ratio
Kethman (2017) – Net Working Capital
Wilkinson (2017) – Inventory Turnover

Variable Parameter Qualitative Description

Current Ratio 1.2 to 2 Above Capable to pay its obligation

1.2 Below Indicates that it doesn’t have enough
liquid assets to cover its short-term
liabilities
 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

21

Quick Ratio 1 & Above Can pay back its current liability
1 & Below Indicates that a company is over-
leveraged, struggling to maintain or
grow sales, paying bills too quickly or
collecting receivables too slowly
Net Working Capital Positive Able to pay off its short-term
liability

Inventory Turnover 1 and Above Indicates greater sales efficiency

and lower risk of loss

1 and Below Indicates poor sales or excess

inventory

The results revealed that in terms of liquidity ratio, as to current ratio, the year 2014, 2015

and 2016 it had the results of 1.2 to 2 that indicated in the qualitative description that they were

capable to pay its obligation on time within the operating period which are the quality things for

the business.The higher the current ratio the better, a ratio was higher than 2 it may indicate that

the company is not investing its short-term assets efficiently.

As to the quick ratio, the year 2014 and 2015 had a high result of ratio that means the

business can pay back its current liability on time with the remaining quick fund to be used in

the future. The year 2016 had revealed a low rate that means the company’s ability to cover its

short term debts is getting worst and action to improve liquidity is necessary.

As to net working capital, in the year 2014, 2015 and 2016, it had a positive result and it

indicated that the qualitative description was they were able to pay off its short-terms liabilities.

This means that it had a sufficient fund to be used into its different operations. And if the result
 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

22

was positive it can continue its operation. A positive result means the company has enough

current assets and money left over after paying its current liabilities.

As to inventory turnover in the year 2014 and 2015, it had a result of 1 and above. Based

on the qualitative description, it indicated greater sales efficiency and lower risk of loss. And in

2016, it had a result of 1 and below turnover and this implies poor sales or excess inventory.

PROFITABILITY RATIO

A profitability ratio focuses on a company’s return on investment in inventory and other

assets. These ratios basically show how well companies can achieve profits from their business

operation presented in table 3.

Table 3 Profitability Ratios

Ratios 2016 2015 2014

Profitability Ratio

Gross Profit Margin 42.16% 21.81% 24.99%

Net Profit Margin 11.43% 04.52% 14.21%

Source:
Morgan (2017) – Gross Profit Margin
Wilkinson (2017) – Net Profit Margin
 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

23

Variable Parameter Qualitative Description

Gross Profit Margin 35% to 45% Indicates that the company can make
a reasonable profit

Below 35% Indicate a company is under-pricing

Net Profit Margin 10 & Above It means that the companies that are
the best organized are the ones that
are the most efficient.

10 & Below It means companies that are the least

organized and efficient.

Table 3 shows the results of profitability ratio as to gross profit margin. The ratio of the

gross profit to sales revenue, in the year 2016, it had a result of 35% to 45% had a positive point

that the business was able to make a reasonable profit. In the years of 2014 and 2015, it had a

result of below 35% of gross profit margin which indicates a company is under-pricing.

As to net profit margin, in the year 2014 and 2016 show the qualitative description. It

had the results of 10 and above which indicated companies that are the best organized are the

ones that are the most efficient. And in the year 2015, it had has a low rate which means has a

least organized and efficient.

SOLVENCY RATIO

The results of solvency ratio provide insight on a company’s capital structure as well as

the level of financial of their business presented in table 4.

 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

24

Table 4 Solvency Ratios

Ratios 2016 2015 2014

Solvency Ratio

Debt to Asset Ratio 21.13% 9.83% 11.56%

Debt to Equity Ratio 26.79% 10.90% 13.07%

Asset Turnover 0.61 times 2.43 times

Source:
Borad(2017) – Debt to Asset Ratio
Fortes(2017) – Debt to Equity Ratio
Murray(2017)- Asset Turnover

Variable Parameter Qualitative Description

Debt to Asset Ratio If less than 1 Indicates that the bulk of asset
funding is coming from equity

If greater than 1 It shows that a considerable

proportion of assets are being
funded with debt

Debt to Equity Ratio If less than 0.5 Most of the company’s assets are
financed through equity
If greater than 0.5 Most of the company’s assets are
financed through debt

Asset Turnover 1 & above Indicates more sales that a business

in producing based on its assets

1& below Means that it’s not good for the

company as the total assets aren’t
able to produce enough revenue at the
end of the year
 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines

25

As to the debt to asset ratio, it shows that in the year 2014, 2015 and2016, it had results

which indicated that if less than 1 it shows as considerable proportion of assets are being

funded with equity.Lower debt to total asset ratio is considered better as a sign of financial

stability of the company. This is because, if the value of debt to total asset is low, it suggests

that the company has borrowed fewer funds as compared to total assets that it owns.

As to the debt to equity ratio, it shows in the years of 2014, 2015 and 2016, it had results

which indicate a low ratio that means that most of the company’s asset are financed through

equity. Low debt-to-equity ratio suits companies operating under volatile and unpredictable

business environments as they cannot afford financial commitments that they cannot meet in

case of sudden downturns in economic activity.

As to the asset turnover, in the year 2016, the asset turnover was 0.61 times. It had the

result of below 1 but it didn’t mean that it had lower sales from the use of their asset. Instead, it

had open sales from asset. In the year 2015 has a result of 2.43 times asset turnover which

indicated in the qualitative description as more sales that a business is producing on its sales.

The result of 1 and below to asset turnover ratio means that it’s not good for the company as the

total assets aren’t able to produce enough revenue at the end of the year.
 ST. PAUL UNIVERSITY SURIGAO
Surigao City, Philippines
Financial Account Improvement
Table 5 Financial Account Improvement
Area of Concerns Issues
Liquidity Ratios  Quick Ratio
The result of quick ratio in
the year 2016 was low and it
means they can’t pay back its
liabilities to the creditors by
having less quick asset in a
period of time.
• Inventory Turnover
Based from the result in terms
of inventory turnover it
shows in the year 2016 was
low and it implies poor sales
or excess inventory.
Profitability Ratios • Net Profit Margin
The Net Profit Margin in the
year 2015 was low that
means has a least organized
and efficient.
Solvency Ratios • Assets Turnover
In the year 2016 asset
turnover was low that means
the firm is inefficient in its
use of its assets.
26
Proposed Improvement
• To improve the quick ratio
they must increase sales.
 To improve their
inventory turnover ratio
is to increase sales and
implement marketing
strategies.
 To improve their net
profit margin, they need
to increase their
revenue and minimize
the utilization of
operating expenses.
 To improve the asset
turnover they must
continuously using
assets, limiting
purchases of inventory
and increase sales.