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1. Liquidity Ratios
A. Current Ratios
The current ratio is called working capital ratio or banks ratios measures the
number of times the current liabilities could be paid with the available current assets.
The table shows that the current ratio is decreasing which means that as the
time goes by, the percentage of change is higher on current liabilities than the
percentage change in current assets. The Current ratios also shows that the values
are more than 1 which means the company can pay its liabilities with its current
assets.
Quick ratio or liquidity ratio measures the ability of a company to use its near cash
or quick assets to extinguish or retire its current liabilities immediately.
The table shows that the company has enough quick assets to cover the
current liabilities throughout the 5 year forecast. Also, it can be seen that as the
time goes by, the percentage change of current liabilities is higher than the
percentage change of quick assets thats why the quick test ratio is decreasing.
C. Cash Ratio
It measures the ability of a business to pay its current obligation as they come due
using cash.
The table shows that the values of cash ratio are more than one which
means that the company will be able to pay its current liabilities using cash
throughout the 5 year forecast.
2. ASSET MANAGEMENT RATIO
Managing the assets will help the firm avoid borrowing funds to finance operations.
B. Inventory Turnover
It measures the number of times inventory is sold or used in a time period such as
a year.
3. SOLVENCY RATIO
Solvency refers to the ability to pay all its debts, whether such liabilities are
current or non-current. It is therefore somewhat similar to liquidity, except that solvency involves
a longer-time horizon.
The total assets of the business firm are provided by the owners and creditors. The
larger the amount provided by owners, the lesser the risk is assured by creditors. To determine
the amount provided by creditors relative to that provided by the owners, the debt-equity ratio is
computed by expressing liabilities as percentage of total owners equity.
DEBT-EQUITY RATIO=TOTAL LIABILITIES/TOTAL OWNERS EQUITY
B. Debt Ratio
The debt ration indicates the percentage of total assets provided by creditors.
DEBT RATIO= TOTAL LIABILITIES/TOTAL ASSETS
The table shows that the creditors provided a very small portion for the
total assets. It also shows that the ratio is rising which means that as the time goes
by, creditors are having an increase in the portion of the total assets.
C. Equity Ratio
The equity ratio indicates the percentage of total assets provided by the owners.
This ratio is actually the compliment of the debt ratio, and therefore can be calculated by
subtracting the debt ratio from 100%.
The table shows that the values are very high which means that the percentage
provided by the owners created almost all the total assets. The forecast also shows that as
the times goes by, there is a little percentage decrease shown in the 5 year forecast.
4. PROFITABILITY RATIO
Profitability can be measures in absolute peso terms, like net income or in terms
of ratios. When we express profit as ratio, we actually relate profit to the amount of the
investment acquired or used in generating such return.
A. Return on Sales
Gross Profit Margin is the gross profit earned on sales and how much of each sale
is available to cover operating expenses.
Operating Profit Margin measures how out of every sales of the business keeps in
earnings.
The table shows that the operating profit margin is increasing in the 5-year
forecast which suggests that as the time goes by, the profit generation will be more
efficient.