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By Ratio Analysis:

2015

COMPUTATION AND INTERPRETATION


1. Liquidity Ratio:

Current Ratio

= Current Assets
Current liabilities
= 18312
44806
= 0.408 times

For every dollar of short term liability Pizza hut has ability to pay with 0.408 current assets,
which is not quite good state.

Quick Ratio

= C.A-inventory
Current liabilities
=8837
44806
= 0.197times

The quick ratio of 0.197 times indicates that Pizza hut has0.197 in quick assets for every dollar
in current liabilities.

2. Asset Management Ratio:

A/c Receivable Turnover Ratio


= Net sales
A/c receivable
= 372603
7262
= 51.3time

Pizza hut recovery time is 51.3 times, it is granting stricter terms of credit that recover accounts
receivables 51 times in a year.

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Average collection Period Ratio


= 365 days
A/R T.O.R
= 365days
51.3
=7.01 days

Pizza hut takes 7 days to recover a/c receivables, time period is short means restricted policy is
followed up as long collection period reduce the liquidity of receivables& ability to pay short
terms obligations.

Inventory T.O.R
= COGS
Inventory
= 304190
9475
=32.10 times

Pizza hut have a least investment of inventory relative to sales as their inventory time period is
32.10 times in a year.

Fixed asset T.O.R


= Net sales
Total fixed assets
= 372603
126293
= 2.95times

For every dollar of fixed assets Pizza hut generated 2.95 net sales, as fixed assets are more
productively utilizing. The use of different cost recovery (depreciation) methods will affect the
fixed assets turnover ratio.

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Total asset T.O.R


= Net sales
Total assets
= 372603
144605
= 2.57 times

Pizza hut generated 2.57 in net sales for every dollar of assets investment. A high ratio shows
greater efficiency in using assets to produce sales.

3. Debt Management Ratio:

Debt Ratio

= Total liabilities
Total assets
= 73395
144605
= 0.507or 50.7%

50.7% investment has been supplied by creditors in Pizza hut & remaining 49.3 % from own
pocket, creating a great doubt on its financial state as its equity huge portion comprises of debts.

Debt Equity Ratio


= Total liabilities
Stockholders equity
= 73395
71210
= 1.o3 or 10.3%

Creditors provided amount about 10.3 in financing for every dollar contributed by owner.

Time- interest earned Ratio


= EBIT
Interest Expense
= 33423
963

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= 34.707 times

Pizza hut earned 34.707 times more than its interest charges.

Fixed charge coverage Ratio


= EBIT+ lease Payment
interest+lease payment+(principle payment+preferred stock dividend)/(1-t)
= 33424
963+0+ [0+0/(1-0.28)]
= 33424
963/0.72
=33424
1337.5
= 24.98 times

Pizza hut is able to cover its fixed charges by 24.98 times.

4. Profitability Ratio:
Gross profit margin Ratio
= Gross profit
Net sales
= 68413
372603
= 0.18 or 18%

A gross profit margin of 0.18 or 18% shows that 18 percent remains from each dollar of sales
after deducting cost of goods sold.

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Net Profit Margin


= Net profit
Net sales
= 23830
372603
= 0.06 0r 6%

Pizza hut profit margin is 0.06 or 6% for every dollar in sales, shows that firms sales are too low
but expenses are too high.

Operating profit margin = EBIT


Net sales
= 33423
372603
= 0.089 or 8.9%

Pizza hut operating process generates of 8.9% in operating profit per dollar of net sales.

Return on investment = Net income


Total assets
= 23830
144605
= 0.16 or 16%
1 dollar of assets are managed that generates 16% return on investment.

Return on equity =

Net income
Stock holders equity

= 23830
71210
= 0.334or 33.4%
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About 33.4% returns on equity realize by firm stock holders on their investment.

5. Market Ratio:

Earnings per share

= Net income preferred stock dividend


Average common share out standing
= 23830
978.71090
= 24.35

Since Pizza hut has no preferred stock in its capital structure, the earning available to common
stockholders equal the firms net income.as its EPS is 24.35.

Price earnings ratio

= Current market price per share


Earnings per share

= 80.44
24.35
= 3.30

Pizza hut P/E ratio shows that the market is willing to pay about 3.30 dollars for every dollars in
earning.

Book value per share

= Total stock equity- preferred stock


Common share outstanding
= 71210
978.71090
= 72.758

Pizza hut book value is 72.75pershare in this accounting period, without taking preferred stock in
consideration as its value is not available.

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Dividend per share

= Total cash dividend on common share


Common share outstanding

= 9787
978.71090
= 10

Pizza hut pays $ 10 for each share of common stock outstanding, which is quite attractive.

Dividend payout

= Cash dividend per share


Earnings per share
= 10
24.35
= 0.410or 41.0%

Pizza hut paid nearly 41%of its earning in dividends. This higher payout ratio may reflects lower
growth opportunities.

Dividend yield

= Cash dividend per share


Current market price per share

= 10
80.44
= 0.1243 or 12.43%

Pizza hut dividend yield of 12.43 % is the rate earned by shareholders from dividends relative to
the current price of the stock.

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Ratio Analysis

2014

COMPUTATION AND INTERPRETATION


1. Liquidity Ratio:

Current Ratio

= Current Assets
Current liabilities

C.R = 6460
39112
= 0.165 times

For every dollar of short term liability Pizza hut has ability to pay with 0.165 current assets,
which is not quite good state.

Quick Ratio

= C.A-inventory
Current liabilities
= 4873
39112

= 0.124

The quick ratio of 0.124 times indicates that Pizza hut has0.124 in quick assets for every dollar
in current liabilities.

2. Asset Management Ratio:

A/c Receivable Turnover Ratio

= Net sales
A/c receivable

A/R T.O.R

= 330399
1750
= 188.79time

Pizza hut recovery time is 188.79times, it is granting more restricted terms of credit that recover
accounts receivables 188.79 times in a year.

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Average collection Period Ratio

= 365 days
A/R T.O.R
= 365days
188.79
=1.90 days

Pizza hut takes 1.9 or 2 days to recover a/c receivables, time period is more frequent means
restricted policy is followed up as long collection period has been prohibited as it reduce the
liquidity of receivables & ability to pay short terms obligations.

Inventory T.O.R

= COGS
Inventory

= 273493
1587
=172.33times

Pizza hut have a least investment of inventory relative to sales as their inventory time period is
172.33 times in a year.

Fixed asset T.O.R

= Net sales
Total fixed assets

= 330399
101878
= 3.24times

For every dollar of fixed assets Pizza hut generated 3.24 times net sales, as fixed assets are more
productively utilizing. The use of different cost recovery (depreciation) methods will affect the
fixed assets turnover ratio.

Total asset T.O.R

= Net sales
Total assets

= 330399
108338
= 3.049times

Pizza hut generated 3.049 times in net sales for every dollar of assets investment. A high ratio
shows greater efficiency in using assets to produce sales.
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3. Debt Management Ratio:

Debt Ratio

= Total liabilities
Total assets

= 43682
108338
= 0.403or 40.3%

40.3% investment has been supplied by creditors in Pizza hut & remaining 59.7% from own
pocket.

Debt Equity Ratio

= Total liabilities
Stockholders equity

= 43682
64656
= 0.675or 67.5%

Creditors provided amount about 67.5% in financing for every dollar contributed by owner.

Time- interest earned Ratio

= EBIT
Interest Expense

= 28170
774
= 36.395 times

Pizza hut earned 36.395times more than its interest charges.

Fixed charge coverage Ratio


= EBIT+ lease Payment
interest+lease payment+(principle payment+preferred stock dividend)/(1-t)
= 28170
774+0+[0+0/(1-0.28)]

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= 28170
774/0.72
=28170
1075
= 26.2 times

Pizza hut is able to cover its fixed charges by 26.2 times.

4. Profitability Ratio:
Gross profit margin Ratio =

Gross profit
Net sales
= 56906
330399
= 0.172 or 17.2%

A gross profit margin of 0.172 or 17.2% shows that 18 percent remains from each dollar of sales
after deducting cost of goods sold.

Net Profit Margin

= Net profit
Net sales
= 16470
330399
= 0.049

Pizza hut profit margin is 0.049 or 4.9% for every dollar in sales, shows that firms sales are too
low but expenses are too high.

Operating profit margin = EBIT


Net sales
= 28170
330399
= 0.085 or 8.5%

Pizza hut operating process generates of 8.5% in operating profit per dollar of net sales.

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Return on investment

= Net income
Total assets
= 19953
108338
= 0.184 or 18.4%

1 dollar of assets are managed that generates 0.184or18.4% return on investment.

Return on equity =

Net income
Stock holders equity

= 19953
64656
= 0.308or 30.8%

About 30.8% returns on equity realize by firm stock holders on their investment.

5. Market Ratio:
Earnings per share

= Net income preferred stock dividend


Average common share out standing

= 19953
978.50110
=20.39

Since Pizza hut has no preferred stock in its capital structure, the earning available to
common stockholders equal the firms net income.as its EPS is 20.39.

Price earnings ratio

= Current market price per share


Earning per share

= 80.44
20.39
= 3.945

Pizza hut P/E ratio shows that the market is willing to pay about 3.945 dollars for every dollars
in earning.

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Book value per share

= Total stock equity- preferred stock


Common share outstanding

= 64656
978.50110
= 66.07

Pizza hut book value is 66.07 per share in this accounting period, without taking preferred stock
in consideration as its value is not available.

Dividend per share

= Total cash dividend on common share


Common share outstanding

= 9299
978.50110
= 9.50

Pizza hut pays $ 9.5 for each share of common stock outstanding, which is quite attractive.

Dividend payout

= Cash dividend per share


Earnings per share

= 9.5
20.39
= 0.465 or 46.5%

Pizza hut paid nearly 46.5%of its earning in dividends. This higher payout ratio may reflects
lower growth opportunities.

Dividend yield

= Cash dividend per share


Current market price per share
= 9.5
80.44

=0.117 or 11.7%

Pizza hut dividend yield of 11.7 % is the rate earned by shareholders from dividends relative to
the current price of the stock.
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TABULAR COMPARISION
Ratios Title
LIQUIDITY RATIO
Current ratio
Quick ratio
ASSETS MANAGEMENT
RATIO
Accounts receivable
turnover ratio
Average collection period
Inventory turnover
Fixed assets turnover
Total assets turnover
DEBT MANGEMENT
RATIO
Debt ratio
Debt equity ratio
Times interest earned ratio
Fixed-charge-coverage ratio
PROFITABILITY RATIO
Gross profit margin
Operating profit margin
Net profit margin
Return on investment
Return on equity
MARKET BOOK RATIO
Earnings per share
Price/earnings ratio
Book value per share
Dividend per share
Dividend payout
Dividend yield

2015

2014

0.48
0.197

0.165
0.124

51.30

188.79

7.01
32.10
2.95
2.57

1.90
172.33
3.24
3.049

50.7%
10.3%
34.707
24.98

40.3%
67.5%
36.395%
26.20

18%
8.9%
6%
16%
33.4%

17.2%
8.5%
4.9%
18.4%
30.8%

24.35
3.30
72.758
10
41.0%
12.43%

20.39
3.945
66.07
9.50
46.5%
11.7%

DESCRIPTIVE COMPARISION
LIQUIDITY RATIO
Current Ratio:
As per data calculated current ratio of Pizza hut in 2015 was $0.408 but is 2014 was
about $0.165 to pay off its current Liabilities. Pizza hut is progressing towards
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maintaining ability to satisfy the claims of short term Creditors by using only CR as
low ratio suggests that firm may have difficulty in paying its bills. The Quality of this
ratio depends on the composition & timing of Pizza huts current ratios assets &
liabilities.

Quick Ratio:
Measure short term liquidity by removing liquid current assets. It indicates that
Pizza hut has $ 0.197 in 2015 but was $ 0.124 in 2014 so that Pizza hut has no
prepaid items & has more inventories in 2014, so that in 2015 it is more capable to
meet current liabilities.

ASSETS MANAGEMENT RATIO


Account Receivable Turnover Ratio:
In 2015 Pizza hut receivable turnover ratio was of 51.30 times but it was too
frequent in 2014 as 188.79 times, this shows that 2014 is efficient in converting
receivable into cash but it could also mean that a firm has restricted credit policy
they granted short term period to pay but that restricted credit policy became such
liberal in 2015 almost 35 times in a year recovery can be a cause of a problem in
sales being too low.

Average Collection Period:


It indicates number of days Pizza hut takes to convert receivable into cash this rate
is used to evaluate credit & collection Policies in 2014, Average Collection Period
was 1.90 days, which is too frequent & increasing its liability of receivable and
positively affection Pizza hut ability to meet short term maturing obligations. But in
2015 they convert restricted policy into less restrictions as a result their recovery
days exceeds from1.90 to 7.01 days creates potential problem exists in either
managing credit or collecting accounts.

Inventory Turnover Ratio:


As it measures the efficiency of the firm in managing & selling inventory .As per
analyze data of Pizza hut statements shows an ITO of 172.33 times in 2014 reduces
to 32.10 times in 2015 shows that in 2014 due to high turnover superior selling
practices & improved liquidity & profitability because less money is tied up in
inventory however high turnover was also signal problem such as lost sales due to
in sufficient inventory but as this ratio reduce in 2015 shows that Pizza hut have a
larger investment of inventory relative to sales this may results due to stock billing
in anticipation of strike or price.

Fixed Assets Turnover Ratio:


It shows management efficiency of Pizza hut in managing fixed assets as its ratio
indicates a fall from 2014 to 2015 of 3.24 to 2.95 times respectively shows that in
2014 fixed assets are being used productively but in 2015 they were over invested
and not using its fixed assets to the same capacity as in 2014.
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Total Assets Turnover Ratio:


A TATOR of 3.049 time in 2014 falls to 2.57 times in 2015 shows that it was less
generating sufficient sales for the size of its investment in assets .As this result is
because Pizza hut other TATOR namely account receivable Inventory and fixed
assets are also show decline comparatively to 2014 ratios asper ratios of 2015 Pizza
hut should take steps to increase sales & dispose of some of its investment in
assets.

DEBT MANAGEMENT RATIO


Debt ratio:
Pizza hut Debt ratio of 40.3% increases to 50.7% indicates that creditors have
supplied a huge of 40 & 50% of every dollar, so that Pizza hut experienced some
difficulty in raising additional debt further creditors may require a higher rate of
returns to compensate for high risk associated with the firms having leverage
increased in 2015.

Debt Equity ratio:


Expresses about relationship between amount of Pizza huts total assets financed by
creditors (Debt) and Owners (equity). It indicated that creditors have provided about
$11.03 in 2015 and about $0.675 in 2014 in Financing for every dollar contributed
by owner. In 2015 Pizza hut have more financial leverage than in 2014 so
consequently may have greater financing charges.

Time interest Earned Ratio:


Measures pizza hut ability to meet its interest payments from operating profit as
high ratio of 36.395 was indicated in 2014 than about 34.70 in 2015 represents that
Pizza hut has a great cushion in covering interest expense which was reduce in
2015 making Pizza hut to be in a state to face difficulty in raising additional
financing through debts.

Fixed charge coverage ratio:


It is a broad measure of the pizza hut ability to meet the total of other fixed
obligations and interest payments. As pizza hut FCCR was 26.20 times in 2014
decrease to 24.95 times in 2015 shows that it is able to meet its fixed obligations as
large cushion of protection in the event of worsening financial position.

PROFITABILITY RATIO
Gross Profit Margin:

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Indicates the ability of Pizza hut to afford cost of goods sold in 2014 is 17.2% shows
little bit increase in 2015 & become 18% remains from each dollar of sales after
deducting COGS. Suggesting that the Pizza hut pricing policies & production costs
may be similar to as in 2014.

Operating Profit Margin:


Indicates the percentage of each sales remaining after deducting both COGS &
Operating expenses so that Pizza hut secure 8.5% in 2014 & 8.9% in 2015, shows
that it had reduced its Operating cost & perhaps lower selling prices in 2015 relative
to 2014 as a result slight increase of 0.4% in Operating Profit Margin.

Net Profit Margin:


Measure percentage of cost of sales dollar remaining after deducting all expenses
so that Pizza hut net profit margin shows 2% increase from 2014 to 2015 due to
increase in sales expenses declines.

Return on Investment:
Measures the effectiveness of management in generation profit from its Total
investment in assets in 2014 Return on investment was 18.4% but was decline to
16% in 2015 shows that Pizza hut has increase problem in its management in
securing profit from overall investment so that it should increase its sales relative to
its cost or reduce costs relative to sales.

Return on Equity:
Pizza hut ROE shows an increment from 30.8% to 33.46% in 2014 to 2015.It is
because of effective management performance & shows that it is more risky in 2015
due to higher leverage as its rate of return realized by Pizza hut stockholder on their
investment in 2015 is relatively greater than in 2014.

MARKET BOOK RATIO


Earning Per Ratio:
It is possible amount of dividends that may be expected as its EPS increased in
2015 with $ 24.35, however it was low in 2014 of about $ 20.39, so that as a result
its market pricing has increased due to increase in EPS rate.

Price Earnings Ratio:

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Often reflects the markets perceptions of the firms growth thus that Pizza hut PER
was 3.94(4) in 2014 but was decline in 2015 to 3.30 shows that investors believe
that Pizza hut future earning potential is declining , so they may not be willing to
pay higher price for stock.

Book value per share:


It is the value of each show of common stock based on the firms account records as
Pizza hut Book value was 66.07 in 2014 increased to 72.758.

Dividend per share:


Pizza hut pays $10 in 2015 as dividend for each share of common stock
outstanding, which is more than 9.5 in 2014

Dividend payout:
It shows percentage of earning paid to shareholders Pizza hut paid nearly 41% of its
earning in dividend in 2015 but paid 46.5% in 2014 the higher payout ratio in 2014
reflects lower growth opportunities due to its over 46.5% of income distributed to
shareholders however but in 2015 it reduced its rate and reinvested in business
operation.

Dividend yield:
It show rate caused by shareholder caused by dividend relative to the current price
of stock it was about 11.7% in 2014 but shows increment to 12.43% in 2015 the
higher dividend yield may reflects fewer investment opportunities on the part of
Pizza hut.

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