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EXECUTIVE SUMMARY
This report contains the financial analysis between the John Keells Holdings PLC and Aitken
Spence PLC for the financial year 2014/2015. Initially there is an introduction for both John
Keells Holding PLC and Aitken Spence PLC and their interested sectors. Second Chapter
contains the financial ratio calculations and analysis between John Keells Holdings PLC and
Aitken Spence PLC. This calculation and analysis is done using five different financial ratio
categories, i.e. Liquidity, Financial Leverage, Interest Coverage, Activity and Profitability
ratios. These five categories further divided into sub ratios. All the possible financial ratios
are calculated and analyzed using the given financial reports.
Third chapter include the conclusion of the report and reference was include in the fourth
chapter. By going through all the financial statements it is known that overall John Keells is
working so well if compared to Aitken Spence. By going through all the financial ratio
analysis (except Return on Equity) the facts were that John Keells Holdings is much more
competitive than Aitken Spence. Comparing the Return on Equity ratio Aitken Spence returns
more money than John Keells to the Shareholders (Investors) who have invest in their firm.
Therefore we consider all the factors we found that John Keells is the best firm to invest
comparing Aitken Spence.
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TABLE OF CONTENTS
ACKNOWLEDGEMENT...............................................................................................................
EXECUTIVE SUMMARY.............................................................................................................
1.0 Introduction................................................................................................................................
2.0 Financial Ratio Calculation and Analysis..................................................................................
2.1 Liquidity Ratios Calculation.................................................................................................
2.1.1 Liquidity Current Ratio......................................................................................................
a)
b)
b)
b)
b)
a)
b)
b)
b)
b)
a)
b)
b)
b)
b)
b)
b)
b)
b)
3.0 Conclusion...............................................................................................................................
4.0 Reference.................................................................................................................................
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LIST OF FIGURES
Figure 1: Comparison of Obtained Liquidity Quick /Acid Ratio values.........................................
Figure 2 : Comparison of Obtained Liquidity Quick /Acid Ratio values......................................
Figure 3 : Comparison of Obtained Debt to Equity Ratio values..................................................
Figure 4: Comparison of Obtained Debt to Assets Ratio values...................................................
Figure 5: Comparison of Obtained Capitalization Ratio values....................................................
Figure 6 : Comparison of Obtained Interest Coverage Ratio values.............................................
Figure 7 : Comparison of Obtained Assets Turnover Ratio values...............................................
Figure 8 : Comparison of Obtained Inventory Turnover Ratio values..........................................
Figure 9 : Comparison of Obtained Gross Profit Margin values...................................................
Figure 10 : Comparison of Obtained Net Profit Margin values....................................................
Figure 11 : Comparison of Obtained Return on Investment values...............................................
Figure 12: Comparison of Obtained Return on Equity values......................................................
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1.0 Introduction
This report is about the financial analysis of two companies which represents nearly the same
industries in the market. Both the companies are listed companies on the Colombo Stock
Exchange, with business interests primarily in Transportation, Leisure (Tourism), Property,
Logistics and Financial Services for more than hundred years. The companies are well
reputed in the market and deal in a very wide range of Services.
As John Keells Holdings PLC (JKH), it is the largest listed company on the Colombo Stock
Exchange started in the early 1870s as a produce and exchange broking business by two
Englishmen, Edwin and George John, the Group has been known to constantly re-align, reposition and re-invent itself in pursuing growth sectors of the time. JKH was incorporated as
a public limited liability company in 1979 and obtained a listing on the Colombo Stock
Exchange in 1986. John Keells business interests primarily in Transportation, Leisure,
Property, Consumer Foods & Retail, Financial Services and Information Technology sectors.
Having issued Global Depository Receipts (GDRs) which were listed on the Luxembourg
Stock Exchange, JKH became the first Sri Lankan company to be listed overseas.
Aitken Spence PLC is one of Sri Lankas oldest and most successful diversified
conglomerates with a history going back for over 150 years. Today, operations of Aitken
Spence are categorized under four sectors, namely, Tourism, Maritime & Logistics, Services
and Strategic Investments. The Company's operations have a global reach spanning South
Asia, the Middle East, Africa and the South Pacific.
This report consist the financial statements analysis between John Keells Holdings PLC and
Aitken Spence PLC for the financial year 2015/2014.
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Current Assets
Current Liabilities
2015/Rs
90,493,026,000
35,172,123,000
2014/Rs
82,206,411,000
33,708,684,000
Rs 90,493,026,000
Rs 35,172,123,000
= 2.5728622
Rs 82,206,411,000
Rs 35,172,123,000
= 2.438730951
2015/ Rs
25,476,394,000
12,426,235,000
2014/ Rs
25,217,995,000
13,644,187,000
Rs 25,476,394,000
Rs12,426,235,000
= 2.050210221
Rs 25,217,995,000
Rs 13,644,187,000
= 1.848259262
2015
2014
2.5728622 2.4387309
2.0502102 1.8482593
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Current AssetsInventory
Current Liabilities
2015/Rs
90,493,026,000
35,172,123,000
5,588,916,000
2014/Rs
82,206,411,000
33,708,684,000
6,966,020,000
( Rs 90,493,026,000Rs 5,588,916,000 )
Rs35,172,123,000
9|Page
= 2.41396034
Current Ratio ( for 2014 )=
( Rs 82,206,411,000Rs 6,966,020,000 )
Rs 33,708,684,000
= 2.232077378
2015/ Rs
25,476,394,000
12,426,235,000
1,484,504,000
2014/ Rs
25,217,995,000
13,644,187,000
1,723,718,000
Rs 25,476,394,000Rs1,484,504,000
Rs12,426,235,000
= 1.930744912
Rs 25,217,995,000Rs 1,723,718,000
Rs 13,644,187,000
= 1.721925755
2015
2014
2.4139603 2.2320774
1.9307449 1.7219258
10 | P a g e
11 | P a g e
Total Debt
Shareholders Equity
Total Liabilities
Shareholders Equity
2015/Rs
2014/Rs
68,009,034,000 67,263,123,000
150,076,810,000 134,318,090,000
Rs 68,009,034,000
Rs 150,076,810,000
= 0.453161511
= 45.31%
Debt Equity ratio( For 2014 )=
Rs 67,263,123,000
Rs 134,318,090,000
= 0.500774862
= 50.07%
b) Aitken Spence PLC
Total Liabilities
Shareholders Equity
2015/Rs
2014/ Rs
23,153,638,000
42,279,450,000
22,138,029,000
38,926,447,000
Rs 23,153,638,000
Rs 42,279,450,000
= 0.547633377
= 54.76%
12 | P a g e
Rs 22,138,029,000
Rs 38,926,447,000
= 0.56871435
= 56.87%
The summary of calculated
2015
2014
0.453161511 0.500774862
0.547633377 0.56871435
ratio compared to Aitken Spence .Therefore Aitken Spence has more financed by debt and it
makes the firm towards to a financial risk compared to John Keells.
2.2.2 Debt to Asset Ratio
Debt to Asset ratio shows the percentage of the firms assets that are supported by Debt
financing. It can be shown in the equation bellow.
Debt Equity ratio=
Total Debt
Total Asset
Total Liabilities
Total Assets
2015/Rs
2014/Rs
68,009,034,000 67,263,123,000
218,085,844,000 201,581,213,000
Rs 68,009,034,000
Rs 218,085,844,000
= 0.311845248
= 31.18%
Debt Asset ratio(For 2014 )=
Rs 67,263,123,000
Rs 201,581,213,000
= 0.333677539
= 33.36%
b) Aitken Spence PLC
Total Liabilities
2015/Rs
2014/ Rs
23,153,638,000
22,138,029,000
14 | P a g e
Total Assets
65,433,088,000
61,064,476,000
Rs 23,153,638,000
Rs 65,433,088,000
= 0.353852137
= 35.38%
Rs 22,138,029,000
Rs 61,064,476,000
= 0.362535314
= 36.25%
The summary of calculated
2015
2014
0.311845248 0.333677539
0.353852137 0.362535314
0.37
0.36
0.35
0.34
0.33
John Keells
0.32
Aitken Spence
0.31
0.3
0.29
0.28
2014
2015
15 | P a g e
Longterm Debt
Total Capitalization
Shareholders Equity
Long-Term Debt/ Non-current liabilities
Capitalization
2014/Rs 000'
134,318,090
33,554,439
167,872,529
Rs 32,836,911 , 000
Rs182,913,721,000
= 0.179521311
= 17.95%
Rs 33,554,439
Total Capitalization ratio (For 2014)=
Rs 167,872,529
16 | P a g e
= 0.199880464
= 19.98%
b) Aitken Spence PLC
2015/Rs 000'
42,279,450
10,727,403
53,006,853
Shareholders Equity
Long-Term Debt/ Non-current liabilities
Capitalization
2014/Rs 000'
38,926,447
8,493,842
47,420,289
Rs10,727,403,000
Rs53,006,853,000
= 0.202377662
= 20.23%
Rs 8,493,842 , 000
Rs 47,420,289 , 000
= 0.179118309
= 17.91%
Capitalization Ratio
2015
0.17952131
2014
0.19988046
John Keells
1
0.20237766
4
0.17911830
Aitken Spence
17 | P a g e
18 | P a g e
2015/ Rs 000
19,075,313,000
668,174,000
0
668,174,000
19,743,487,000
2014/ Rs 000
15,320,433,000
1,169,163,000
47,843
1,217,006,000
16,537,439,000
Assume that Total Interest charge for John Keells is equal to the sum of interest charge and
exchange losses.
By using the above equation,
Interest Coverage ratio(For 2015)=
Rs 19,743,487,000
Rs 668,174,000
= 29.54842152
Interest Coverage ratio( For 2014 )=
Rs 16,537,439,000
Rs 1,217,006,000
= 13.58862569
b) Aitken Spence PLC
Rs 6,516,288,000
Rs 806,365,000
= 8.081065026
19 | P a g e
Rs 6,619,184,000
Rs 1,174,238,000
= 5.637003742
The summary of calculated
2015
2014
29.5484215 13.5886257
8.08106503 5.63700374
20 | P a g e
Assume that all the sales are credit sales and annual revenue is equal to annual net credit
sales,
a) John Keells Holdings PLC
2015/ Rs
91,582,219,000
10,269,689,000
2014/ Rs
86,706,426,000
12,146,573,000
Rs 91,582,219,000
Rs10,269,689,000
= 8.91772078
Rs 86,706,426,000
Rs 12,146,573,000
= 7.138344783
2014/Rs
34,577,379,000
9,049,706,000
Rs 34,930,493,000
Rs 7,770,650,000
= 4.4951829
21 | P a g e
Rs 34,577,379,000
Rs 9,049,706,000
= 3.820828986
2015
8.91772078
4.4951829
2014
7.138344783
3.820828986
This ratio indicates the quality of receivables and how successful the firm is in its collection.
It is an important indicator of a company's financial and operational performance and can be
used to determine if a company is having difficulties collecting sales made on credit. A higher
Receivable Turnover Ratio is generally preferable. John Keells has Receivable Turnover
Ratio of 8.91 whereas Aitken Spence has 4.49. Further by comparing year 2014 and 2015;
Receivable Turnover Ratio of both firms has been increases. Comparing both firms John
Keells have a higher Receivable Turnover Ratio. Therefore John Keells is more successful in
their money collection.
2.4.2 Average Collection Period
This ratio indicates the average number of days that receivables are outstanding. It can be
shown in the equation bellow,
Average Collection Period=
Daysthe year
Receivable Turnover
2015
8.91772078
4.4951829
365
8.91772078
22 | P a g e
2014
7.138344783
3.820828986
= 40.92974079 Days
Average Collection Period (For 2014)=
365
7.138344783
= 51.13230183 Days
365
4.4951829
= 81.1980309 Days
365
3.820828986
= 95.52900727 Days
2015
40.92974079
81.1980309
2014
51.13230183
95.52900727
This ratio indicates the average number of days that receivables are outstanding. Lower
average collection period is preferable and its inversely proportion to the Receivable
Turnover Ratio. John Keells has Average Collection Period of 41 days whereas Aitken
Spence has 81 days. Further by comparing year 2014 and; Average Collection Period of both
firms has been decreases. Comparing both firms John Keells have a lower Average Collection
Period. Therefore John Keells is collecting their money in a short period compared to Aitken
Spence.
23 | P a g e
2015/ Rs
64,814,227,000
11,267,339,000
Rs 64,814,227,000
Rs11,267,339,000
= 5.75239877
b) Aitken Spence PLC
2015/Rs
12,231,681,00
Annual Credit Purchases
Account Payable
0
7,074,023,000
Rs 12,231,681,000
Rs 7,074,023,000
= 1.72909828
The summary of calculated current ratio as shown below,
Payable turnover
24 | P a g e
2015
John Keells
Aitken Spence
5.75239877
1.72909828
Accounts payable turnover ratio is an accounting liquidity metric that evaluates how fast a
company pays off its creditors (suppliers). The ratio shows how many times in a given period
(typically 1 year) a company pays its average accounts payable. John Keells has payable
turnover ratio of 5.75 whereas Aitken Spence has 1.73. Comparing both firms John Keells
have a higher payable turnover ratio. In Financing its better to delay the payables as much as
possible (without violating the terms & conditions with the creditors). Many companies
extend the period of credit turnover (i.e. lower accounts payable turnover ratios) getting extra
liquidity. Therefore Aitken Spence is pays off their creditors in less number of times
compared to John Keells to getting extra liquidity.
2.4.4 Average Payable Period
This ratio indicates the average numbers of days that payable are outstanding. It can be
shown in the equation bellow,
Average Payable Period=
Daysthe year
Payable Turnover
Payable turnover
John Keells
Aitken Spence
2015
5.75239877
1.72909828
365
5.75239877
25 | P a g e
365
1.72909828
= 211.0926859 Days
The summary of calculated current ratio as shown below,
Average Payable Period
John Keells
Aitken Spence
2015
63.451790
211.0926859
Accounts payable turnover period is an accounting liquidity metric that evaluates how fast a
company pays off its creditors (suppliers). The ratio shows how many days the firm in a
given period (typically 1 year) a company pays its average accounts payable. John Keells has
payable turnover period of 63 days whereas Aitken Spence has 211 days. Comparing both
firms Aitken Spence has a higher payable turnover ratio. In Financing its better to delay the
payables as much as possible (without violating the terms & conditions with the creditors)
.Normally creditors will gave a period of 1 year i.e. 365 days .Therefore Aitken Spence is
paying off their creditors in an ideal period compared to John Keells.
2.4.5 Total Assets Turnover Ratio
This ratio measures how efficiently a firm uses its assets to generate sales. It can be shown in
the equation bellow.
Total Assets Turnover Ratio=
Net Sales
Total Assets
2015/ Rs 000'
91,582,219
218,085,844
2014/ Rs 000'
86,706,426
201,581,213
Rs 91,582,219,000
Rs 218,085,844 , 0 00
= 0.419936559
Total Assets Turnover Ratio( For 2015)=
26 | P a g e
Rs 86,706,426,000
Rs 201,581,213,000
= 0.430131483
b) Aitken Spence PLC
2015/Rs 000'
34,930,493
65,433,088
2014/ Rs 000'
34,577,379
61,064,476
Rs 34,930,493,000
Rs 65,433,088,000
= 0.533835313
Total Assets Turnover Ratio( For 2015)=
Rs 34,577,379,000
Rs 61,064,476,000
= 0.566243768
The summary of calculated current ratio as shown below,
Total Assets Turnover Ratio
John Keells
Aitken Spence
2015
0.419936559
0.533835313
27 | P a g e
2014
0.430131483
0.566243768
28 | P a g e
2015/Rs 000'
66,191,331
5,588,916
2014/ Rs 000'
62,711,967
6,966,020
Rs 66,191,331,000
Rs 5,588,916,000
= 11.84332185
Rs 62,711,967,000
Rs 6,966,020,000
= 9.002553395
Rs 9,023,459,000
Rs 1,484,504,000
= 6.078433605
Rs 10,837,263000
Rs 1,723,718,000
= 6.287143837
29 | P a g e
2015
11.84332185
6.078433605
201
9.002553395
6.287143837
30 | P a g e
bottom line and its return to its investors. Profitability measures are important to company
managers and shareholders.
2.5.1 Gross Profit Margin
Gross profit margin indicates the efficiency of operation and firm pricing policy. It can be
shown in the equation bellow.
Gross Profit Margin=
Gross Profit
Net Sales
Rs 19,075,313,000
Rs 25,390,888,000
= 0.277246918
= 27.72%
Gross Profit Margin ( For 2014)=
Rs 86,706,426,000
23,994,459,000
= 0.276732188
= 27.67%
b) Aitken Spence PLC
Assume that Profit before tax is equal to the Gross profit.
Rs 5,709,923,000
Rs 34,930,493,000
= 0.163465285
= 16.34%
Gross Profit Margin ( For 2014 ) =
Rs 5,444,946,000
34,577,379,000
= 0.157471334
= 15.74%
as shown below,
2015 %
27.72
16.34
2014 %
27.67
15.74
`
Figure 9 : Comparison of Obtained Gross Profit Margin values
32 | P a g e
Gross profit margin indicates the efficiency of operation and firm pricing policy. Its a good
indication of how profitable a company is at the most fundamental level, how efficiently a
company uses its resources, materials, and labor. It is usually expressed as a percentage, and
indicates the profitability of a business before overhead costs .A higher Gross Profit Margin
is generally preferable. John Keells has Gross Profit Margin of 27.72% whereas Aitken
Spence has 16.34%. Further by comparing year 2014 and 2015 according to the Figure 9 ;
Gross profit margin of John Keells remains nearly the same level while Aitken Spence has
improved. Therefore John Keells is more profitable business firm considering the, before
overhead costs.
2.5.2 Net Profit Margin
When doing a simple profitability ratio analysis, net profit margin is the most often margin
ratio used. The net profit margin indicates the firms profitability after taking account all the
expenses and the income tax. It can be shown in the equation bellow.
Net Profit Margin=
2015/Rs 000'
2014/Rs 000'
91,582,219,000 86,706,426,000
15,745,537,000 12,958,327,000
Rs 15,745,537,000
Rs 91,582,219,000
= 0.171927883 = 17.20%
Net Profit Margin(For 2014)=
Rs 12,958,327,000
Rs 86,706,426,000
= 0.135189588 = 13.52%
b) Aitken Spence PLC
33 | P a g e
`
Net sales /revenue
Net Profit after tax
2015/Rs 000'
2014/Rs 000'
34,930,493,000 34,577,379,000
4,883,600,000 4,579,489,000
Rs 4,883,600,000
Rs 34,930,493,000
= 0.139809077 = 13.98%
Net Profit Margin(For 2014)=
Rs 4,579,489,000
Rs34,577,379,000
= 0.132441762
= 13.24%
2015 %
17.19
13.98
34 | P a g e
2014 %
13.52
13.24
Return on Investment=
2015/Rs 000'
15,745,537,000
218,085,844,00
2014/Rs 000'
12,958,327,000
201,581,213,00
Total Assets
Rs 15,745,537,000
Rs 218,085,844,000
= 0.072198804
= 7.22%
Return on Investment (For 2014 )=
Rs 12,958,327,000
Rs 201,581,213,000
= 0.064283406
= 6.42%
b) Aitken Spence PLC
`
2015 Rs 000'
4,883,600,00
2014 Rs 000'
4,579,489,00
0
65,433,088,0
0
61,064,476,0
00
00
Total Assets
By using the above equation,
Return on Investment (For 2015)=
Rs 4,883,600,000
Rs 65,433,088,000
= 0.074635023
36 | P a g e
= 7.46%
Return on Investment (For 2014 )=
Rs 4,579,489,000
Rs 61,064,476,000
= 0.074994322
= 7.50%
Return on Investment
as shown below,
2015 %
7.22
7.46
2014 %
6.42
7.50
Return on Investment while Aitken Spence remains nearly the same. Even though John
Keells having less ROI in 2015, there are able to increase their efficiency of the investment
compared to 2014.
2.5.4 Return on Equity
The Return on Equity ratio is perhaps the most important of all the financial ratios to
investors in the company. It measures the return on the money the investors have put into the
company. It can be shown in the equation bellow.
Return on Equity=
2015/Rs 000'
15,745,537,000
150,076,810,00
Shareholders Equity
2014/Rs 000'
12,958,327,000
0 134,318,090,000
Rs 15,745,537,000
Rs 150,076,810,000
= 0.104916522 = 10.49%
Return on Equity( For 2014)=
Rs 12,958,327,000
Rs 134,318,090,000
= 0.09647492 = 9.65%
b) Aitken Spence PLC
`
Net Profit after tax
Shareholders Equity
2015/Rs 000'
2014/Rs 000'
4,883,600,000 4,579,489,000
42,279,450,000 38,926,447,000
38 | P a g e
Rs 4,883,600,000
Rs 42,279,450,000
= 0.120276979 =12.02%
Returnon Equity( For 2014)=
Rs 4,579,489,000
Rs 38,926,447,000
= 0.126261536 = 12.62 %
Return on Equity
as shown below,
2015 %
10.49
12.02
2014 %
9.65
12.62
Investment John Keells has increased their Return on Equity while Aitken Spence decreases.
By compering both firms Aitken Spence having higher ROE. Therefore according to the
figures Aitken Spence return more money the investors have put into their firm.
3.0 Conclusion
Summary of the all calculations can be as shown below.
Financial Ratio
2015
John
Aitken
Keells
Spence
2.57
2.05
2.41
1.93
Liquidity Ratios
Current Ratio
Acid-Test Ratio
2014
John
Aitken
Keells
Spence
2.44
1.85
2.23
1.72
Financial
Leverage Ratios
Debt-to-Equity
Debt-to-Total-Assets
Total Capitalization
0.45
0.31
0.55
0.35
0.50
0.33
0.57
0.36
0.18
0.20
0.20
0.18
29.55
8.08
13.59
5.64
8.92
4.50
7.14
3.82
41
5.75
63
11.84
0.42
81
1.73
211
6.08
0.53
51
96
9.00
0.43
6.29
0.57
Coverage Ratios
Interest Coverage
Activity Ratios
Receivable Turnover
Average Collection Period
in Days
Payable Turnover
Payable Turnover in Days
Inventory Turnover
Total Asset Turnover
40 | P a g e
Profitability
Ratios
Gross Profit Margin %
Net Profit Margin %
Return on Investment %
Return on Equity %
27.72
17.19
7.22
10.59
16.35
13.98
7.46
12.02
27.67
13.52
6.43
9.65
15.75
13.24
7.50
12.63
From the financial statements it is clear that the financial position of the John Keels is far
better than Aitken Spence. According to the obtained Liquidity ratios John Keells has more
ability to paying off its short term obligations without relying on the level or sales of
inventory. Considering financial leverage ratios it can be seen that Aitken Spence has more
financed by debt and it makes the firm towards to a financial risk and also Aitken Spence has
risk of insolvency if they fail to repay their debt on time.
By considering the interest coverage ratio John Keells having very high value hence they
have fewer chances of failure and facing bankruptcy than Aitken Spence. John Keells is more
successful in their money collection and they have an efficient buying practice, and a good
inventory management system compared to Aitken Spence. Considering all the Activity ratios
it can be seen that the John Keells is doing their business activities well compared to Aitken
Spence.
Considering the profitability ratios from both Net profit margin and gross profit ratios John
Keells is more profitable business firm than Aitken Spence. But John Keells Return on
Equity and Return on Investment little less compared to Aitken Spence. Typically Investors
are looking for higher return for their investment. If we didnt consider the other factors in to
account, then Aitken Spence is more suitable firm to be investing. But John Keells is more
financially stable and having less financial risk compared to the Aitken Spence. Therefore we
consider all the factors John Keells is the best firm to invest comparing Aitken Spence.
41 | P a g e
4.0 Reference
www.myaccountingcourse.com/financial-ratios
http://www.investopedia.com/university/ratio-analysis/using-ratios.asp
https://www3.nd.edu/~mgrecon/simulations/micromaticweb/financialratios.html
https://en.wikipedia.org/wiki/Financial_ratio
http://www.businessplanhut.com/activity-ratios-examples-and-formulas
http://www.inc.com/encyclopedia/financial-ratios.html
http://www.accountingverse.com/managerial-accounting/fs-analysis/financial-ratios.html
http://www.readyratios.com/reference/debt/capitalization_ratio.html
http://www.readyratios.com/reference/debt/debt_ratio.html
http://www.readyratios.com/reference/asset/asset_turnover.html
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http://www.readyratios.com/reference/asset/inventory_turnover.html
http://www.readyratios.com/reference/profitability/gross_margin.html
http://www.readyratios.com/reference/profitability/net_profit_margin.html
http://www.readyratios.com/reference/profitability/return_on_equity.html
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