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FINANCIAL STATEMENT ANALYSIS

1. Liquidity Ratios

Liquidity Refers to the companys ability to pay short-term current liabilities as


they fall due.

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.

CURRENT RATIO= CURRENT ASSETS/CURRENT LIABILITIES

2017 2018 2019 2020 2021

Current Assets 1,033,010.03 1,076,466.80 1,293,620.54 1,572,958.43 1,993,141.13

Current 54,184.58 52,501.98 107,134.49 144,499.69 200,584.49


Liabilities

Current Ratio 19.06 20.50 12.07 10.89 9.94

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.

B. Quick Test Ratio

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.

QUICK TEST RATIO= QUICK ASSET/CURRENT LIABILITIES

2017 2018 2019 2020 2021

Quick Assets 908,391.87 945,283.65 1,161,362.72 1,439,137.96 1,857,688.3

Current Liabilities 54,184.58 52,501.98 107,134.49 144,499.69 200,584.49

Quick Test Ratio 16.76 18.0 10.84 9.96 9.26

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.

CASH RATIO=CASH/CURRENT LIABILTIES

2017 2018 2019 2020 2021

Cash 726,606.16 765,194.36 960,023.43 1,220,387.96 1619,474.01

Current Liabilities 54,184.58 52,501.98 107,134.49 144,499.69 200,584.49

Cash Ratio 13.41 14.57 8.96 8.45 8.07

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.

A. Account Receivable (AR) Turnover

It measures how efficiently a firm uses its assets.

AR TURNOVER= NET SALES/AVERAGE INVENTORY

2017 2018 2019 2020 2021

Net Sales 1,817,857.10 1,800,892.80 2,013,392.80 2,187,500 2,382,142.20

Average AR 90,892.86 180,937.5 190,714.29 210,044.65 228,482.15

AR Turnover 20 9.95 10.56 10.41 10.43


The table shows how fast the collections from accounts receivable would
be throughout the 5 year forecast. It can be seen that from its second year, the
ARturnover is increasing.

B. Inventory Turnover

It measures the number of times inventory is sold or used in a time period such as
a year.

INVENTORY TURNOVER= COST OF SALES/AVERAGE INVENTORY

2017 2018 2019 2020 2021

Cost of Sales 818,797.76 842,198.53 884,726.7 917,745.5 959,973.08

Average Inventory 20,309.08 43,900.66 47,720.49 49,039.15 50,636.65

Inventory Turnover Ratio 40.32 19.18 18.54 18.71 18.96


The table shows how fast inventory would be converted into sales in the 5
year forecast.It can be seen that from the second year, the Inventory turnover will
increase in the succeeding years by a very little increase.

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.

A. Debt- Equity Ratio

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

2017 2018 2019 2020 2021

Total Liabilities 54,184.58 52,501.98 107,134.49 144,499.69 200,584.49

Total Equity 1,495,996.27 1,490,290.46 1,601,966.51 1,793,094.02 2,106,346.74

Debt- Equity Ratio 0.0362 0.0352 0.0669 0.0806 0.0952

The table shows the equivalent amount provided by the creditors


for every 1php provided by the owners for the 5-year forecast.

B. Debt Ratio

The debt ration indicates the percentage of total assets provided by creditors.
DEBT RATIO= TOTAL LIABILITIES/TOTAL ASSETS

2017 2018 2019 2020 2021

Total Liabilities 54,184.58 52,501.98 107,134.49 144,499.69 200,584.49

Total Assets 1,550,180.85 1,542,792.44 1,709,101 1,937,593.71 2,306,931.23

Debt Ratio 0.035 0.034 0.0627 0.0746 0.0869

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%.

EQUITY RATIO= TOTAL OWNERS EQUITY/TOTAL ASSETS

2017 2018 2019 2020 2021

Total Equity 1,495,996.27 1,490,290.46 1,601,966.51 1,793,094.02 2,106,346.74

Total Assets 1,550,180.85 1,542,792.44 1,709,101 1,937,593.71 2,306,931.23

Equity Ratio 0.9650 0.9660 0.9373 0.9254 0.9131

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

RETURN ON SALES= NET INCOME/SALES

2017 2018 2019 2020 2021

Net Income 45,996.27 44,294.19 161,676.05 241,127.51 363,252.72

Sales 1,817,857.14 1,800,892.86 2,013,392.86 2,187,500 2,382,142.86

Return on Sales 0.0253 0.0246 0.0803 0.1102 0.1525


The table shows that the return on sales have small values but throughout the 5
year forecast, the values are increasing which means that the company is having a bigger
return on sales as the times goes by.

B. Gross Profit Margin

Gross Profit Margin is the gross profit earned on sales and how much of each sale
is available to cover operating expenses.

GROSS PROFIT MARGIN=GROSS PROFIT/SALES

2017 2018 2019 2020 2021

Gross Profit 999,059.38 958,694.33 1,128,666.16 1,269,754.5 1,422,169.78

Sales 1,817,857.14 1,800,892.86 2,013,392.86 2,187,500 2,382,142.86

Gross Profit Margin 0.5496 0.5323 0.5606 0.5805 0.5970


The table shows that the gross profit margin is increasing as the time goes
by. It means that the sales are able to cover the operating expenses more in the
succeeding years.

C. Operating Profit Margin

Operating Profit Margin measures how out of every sales of the business keeps in
earnings.

OPERATING PROFIT MARGIN=EARNING BEFORE INCOME TAX (EBIT)/SALES

2017 2018 2019 2020 2021

EBIT 65,708.95 63,277.42 230,965.79 344,467.87 518,932.46


Sales 1,817,857.14 1,800,892.86 2,013,392.86 2,187,500 2,382,142.86

Operating Profit. 0.0361 0.0351 0.1147 0.1575 0.2178


Margin

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.