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Financial Analysis MAS Airline Company We adopted four ratios to analysis MAS Airline Company financial position from

2008 to 2012 there are liquidity ratio, profitability ratio, leverage ratio and activity ratio. Liquidity ratio Liquidity ratio means to evaluate a companys ability to repay back the short term debt that the company borrows like account payable, wages and others. Besides that, there are seven types of example liquidity ratio such as acid-test ratio, cash ratio, current ratio, net working ratio, quick ratio, working capital and working capital ratio. We take current ratio and quick ratio to calculate the liquidity ratio. If the current ratio more than one, it mean that the company current liabilities less than current asset. While the quick ratio is indicate company short term liquidity. The higher the quick ratio, the company can pay short term debt. Current ratio= Current Assets Current liabilities Quick ratio= (Current asset inventories) / current liabilities

Table 1: Liquidity ratio from 2008-2012 2008 (times) 2009 (times) 2010 (times) 2011 (times) 2012 (times)

Current Ratio

6,530,269 4,998,464 = 1.31

4,637,557 5,450,799 = 0.85

4,014,759 5,460,801 = 0.74

2,773,066 7,019,426 = 0.40

3,904,034 6,914,259 = 0.56

Quick Ratio

6,159,614 4,998,464 = 1.23

4,259,484 5,450,799 = 0.78

3,589,796 5,460,801 = 0.66

2,418,880 7,019,426 = 0.34

3,578,585 6,914,259 = 0.52

Diagram 1

Current Ratio
1.4 1.2 1 0.8 0.6 0.4 0.2 0 Current Ratio Axis Title

2008 1.31

2009 0.85

2010 0.74

2011 0.4

2012 0.56

From table 1, we can conclude that current ratio from 2008 to 2012 is falling significantly. The highest of the quick ratio is at 2008 while lowest at 2011. Besides, current ratio felled from 2008 to 2011. It show MAS current liabilities more than current asset and the financial position not too strength. Diagram 2

Quick Ratio
1.4 1.2 1 0.8 0.6 0.4 0.2 0 Quick Ratio

2008 1.23

2009 0.78

2010 0.66

2011 0.34

2012 0.52

From diagram 2, we can conclude that quick ratio started declined from 2008 to 2011 but increase in 2012. Thus, MAS Airline does not have enough the assets to pay short term debt. The quick ratio increase at year 2012 to 0.52 times. Profitability ratio The meaning of profitability ratio is control the firm expense to generate an acceptable rate of return and measure the availability to repay the debt by use cash. Operating profit margin, net profit margin, return on total assets, and return on stockholders equity are the four ratios that we calculate for profitability ratio.

Operating profit margin = Operating income/ Net sales Net profit Margin= Net profit/ Revenue Return on total asset= EBIT / Total Net Asset Return on stockholders equity= Net Income / Shareholders equity

Table 2: Profitability ratios from 2008 to 2012 2008 (%) 2009 (%) 2010 (%) 2011 (%) 2012 (%)

Operating Profit Margin

293,083 13,247,237 = 2.21

696,899 9,857,104 = 7.07

(251,056) 11,104,531 = -2.26

(2,185,571) 11,984,708 = -18.23

(272,479) 11,930,377 = -2.28

Net Profit Margin

228,021 13,247,237 = 1.72

627,474 9,857,104 = 6.37

107,241 11,104,531 = 0.97

(2,344,398) 11,984,708 = -19.56

(481,457) 11,930,377 = -4.04

Return on total Assets

228,021 9,994,756 = 2.28

627,474 8,431,586 = 7.44

107,241 12,301,641 = 0.87

(2,344,398) 11,998,747 = -19.54

(481,457) 16,589,093 = -2.9

Return on Stockholders Equity

228,021 4,010,715 = 5.69

627,474 698,021 = 89.9

107,241 3,395,266 = 3.16

(2,344,398) 1,093,198 = -214.45

(481,457) 2,119,638 = -22.71

Diagram 3: Operating profit margin

Operating Profit Margin


10.00% 0.00% -10.00% -20.00% Operating Profit Margin

2008 2.21%

2009 7.07%

2010 -2.26%

2011 -18.23%

2012 -2.28%

Based on diagram 3, from 2008 to 2009 indicate positive operating profit margin but 2010 to 2012 indicate negative operating profit margin. MAS Airline Company loses profit from 2010 to 2012. In year2011, MAS Airline Company faced a huge loss in the business. Diagram 4: Net Profit Margin

Net Operating Margin


10.00% 0.00% -10.00% -20.00% -30.00% Net Operating Margin 2008 1.72% 2009 6.37% 2010 0.97% 2011 -19.56% 2012 -4.04%

Based on diagram 4 above, MAS Airline net profit margin fluctuated from year 2008 to 2012. In 2008 net profit margin increase from 1.72% to -19.54% in 2009 then increase to -4.04% in 2012. On top of that, negative net profit margin because MAS Airline losses profit. High percentage is benefits for the company because it shows reducing in expenses. Diagram 5: Return on Total Assets

Return on Total Assets


10.00% 0.00% -10.00% -20.00% -30.00% Return on Total Assets 2008 2.28% 2009 7.44% 2010 0.87% 2011 -19.54% 2012 -2.90%

Return on total assets is to determine the effectiveness of management in using asset to generate income. The higher return on total assets is 7.44% at year 2009 while the lowest return on asset is -19.54% at year 2011. In year 2009, MAS Airline Company is effectiveness using their asset to generate more income. In year 2008, 2010 and 2012, the return on total asset achieved by MAS Airline is 2.28%, 0.87% and -2.90% respectively. Diagram 6: Return on Stockholders Equity

Return on Stockholders' Equity


150.00% 100.00% 50.00% 0.00% -50.00% -100.00% -150.00% -200.00% -250.00% Return on Stockholders' Equity

2008 5.69%

2009 89.90%

2010 3.16%

2011 -214.45%

2012 -22.71%

Diagram 6 shows that return on stockholders equity on 2008 to 2012. Return on stockholder equity is to measure profitability of a company by revealing how much profit a company earn with the money of shareholder have invested. In 2008, return on stockholders equity increase from 5.69% to 89.90% in 2009 then decrease to 214.45% in 2011. It show that MAS Airline Company unable to provide high return of equity to stockholder. In 2012, the return on stockholders equity had increase to 22.71%. Leverage ratio Leverage ratio is to measure ability of the company to meet financial obligations. Debt to total assets ratio and debt to equity ratio are the method that we calculate leverage ratio for MAS Airlines Company. Companys cost mix and effect on the operating income is determined by the leverage ratio.

Total Debt to Total Assets = Short-term debt + Long term debt / Total asset Debt to equity ratio= Total liabilities / shareholder equity

Table 3: Leverage ratio from 2008-2012. 2008 (times) Debt to Total Assets Ratio 2009 (times) 2010 (times) 2011 (times) 2012 (times)

5,984,041 9,994,756 = 0.6

7,733,565 8,431,586 = 0.92

8,906,375 12,301,641 = 0.72

10,905,549 11,998,747 = 0.91

14,469,455 16,589,093 = 0.87

Debt to Equity Ratio

5,984,041 4,010,715 = 1.49

7,733,565 698,021 = 11.08

8,906,375 3,395,266 = 2.62

10,905,549 1,093,198 = 9.98

14,469,455 2,119,638 = 6.63

Diagram 7: Debt to total asset ratio

Debt to Total Asset Ratio


1 0.8 0.6 0.4 0.2 0 Debt to Total Asset Ratio 2008 0.6 2009 0.92 2010 0.72 2011 0.91 2012 0.87

Based on diagram 7, debt to total asset ratio for MAS Airline Company fluctuated from 2008 to 2012.The higher the ratio, the higher the degree of leverage and financial risk. In year 2009, MAS Airline Company faced the highest ratio that is 0.92 times. So, in year 2009 MAS Airline faced more debt. In 2008,2010, 2011 and 2012 the ratio is 0.6,0.72, 0.91 and 0.87 respectively.

Diagram 8: Debt to equity ratio

Debt to Equity Ratio


12 10 8 6 4 2 0 Debt to Equity Ratio

2008 1.49

2009 11.08

2010 2.62

2011 9.98

2012 6.63

Debt to equity ratio indicates how many equity and debt are uses to finance company asset. In year 2008, debt to equity ratio increase from 1.49 times to 11.08 times in 2009 after that decrease to 2.62 times in 2010. In year 2009, MAS Airline Company face high risk. On the other hand, in year 2011 debt to equity ratio decrease from 9.98 times to 6.63 times in 2012. Activity ratio Activity ratio is to measure ability of the company to convert different account from balance sheet into cash. Based on its use asset, leverage and other balance sheet item can measure the efficiency of the firm by using activity ratio. There are three types of activity that will be calculated for MAS Airlines such as inventory turnover, fixed asset turnover and total asset turnover. Inventory Turnover= Sales/ Inventory Fixed Assets Turnover= Net Sales/ Net property, Plan, and Equipment Total Assets Turnover= Revenue/ Assets

Table 4: Activity ratio from 2008-2012 2008 (times) 2009 (times) 2010 (times) 2011 (times) 2012 (times)

Inventory Turnover

13,247,237 370,655 = 35.74

9,857,104 378,073 = 26.07

11,104,531 424,963 = 26.13

11,984,708 354,186 = 33.84

11,930,377 325,449 = 36.66

Fixed Assets Turnover

13,247,237 3,464,487 = 3.82

9,857,104 3,815,157 = 2.58

11,104,531 8,405,927 = 1.32

11,984,708 9,225,681 = 1.3

11,930,377 12,685,059 = 0.94

Total Assets Turnover

13,247,237 9,994,756 = 1.33

9,857,104 8,431,586 =1.17

11,104,531 12,301,641 = 0.90

11,984,708 11,998,747 = 1.0

11,930,377 16,589,093 = 0.72

Diagram 9: Inventory Turnover

Inventory Turnover
40 30 20 10 0 Inventory Turnover 2008 35.74 2009 26.07 2010 26.13 2011 33.84 2012 36.66

Diagram 9 shows that inventory turnover over the 5 year for MAS Airline Company. Basically, inventory turnover is to calculate how many times companys inventory sold out and replaced. In year 2008, inventory turnover decrease from 35.74 times to 26.07 in 2009 and increase to 36.66 in year 2012. In year 2012, MAS Airline Company does not have enough inventories which may lead loss in business.

Diagram 10: Fixed Asset Turnover

Fixed Assets Turnover


5 4 3 2 1 0 Fixed Assets Turnover

2008 3.82

2009 2.58

2010 1.32

2011 1.3

2012 0.94

Fixed asset turnover is to measure the ability of MAS Airline Company to generate net sales from net property, plan, and equipment. The higher the fixed asset turnovers, the more effectiveness of the company use the investment in fixed asset to earn more profit. Based on diagram 10, MAS Airline Company fixed asset turnover decrease from 3.82 times in 2008 to 0.94 times in 2012. Thus, at the year 2012, MAS Airline Company over-invested in net property, plan, and equipment. Diagram 11: Total Assets Turnover

Total Assets Turnover


1.5 1 0.5 0 Total Assets Turnover 2008 1.33 2009 1.17 2010 0.9 2011 1 2012 0.72

The meaning of the total assets turnover is the amount of the sales generated of every dollar from the asset. The 1.33 times of the total asset turnover in year 2008 decline to 0.9 times in 2010. However, increase 0.10 times from 0.9 times to 1.0 time in year 2011then decrease to 0.72 times in year 2012. Therefore, in year 2008 MAS Airline Company can generate more profits because the company is able to manage its assets most effectively in the operation

WEBSITE LINK http://en.wikipedia.org/wiki/Financial_ratio http://www.investopedia.com/terms/r/returnonequity.asp http://www.readyratios.com/reference/liquidity/ http://www.investopedia.com/terms/q/quickratio.asp http://www.investopedia.com/terms/t/totaldebttototalassets.asp http://www.investopedia.com/terms/a/assetturnover.asp