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FINANCIAL STATEMENT ANALYSIS

Liquidity Ratios: Measure companys ability to pay debt obligation

1. Current Ratio: Measures companys ability to pay their short term obligation

Current Assets
Formula =
Current Liabilites

Year 2015 2016


Current Ratio 1.48 1.35

Although company shows slight decline in current ratio from the prior year, this company
still able to maintain their current ratio more than one. Overall, this amount indicates that the
company are performing well because their current assets are always more than their current
liabilities.

Profitability Ratios: Measure companys ability to generate earnings compare to its


expenses and other relevant costs incurred during a specific period of time

1. Operating Profit Margin: Measures companys ability to generate return from each unit of
sales

Net Income
Formula =
Sales

Year 2015 2016


Operating Profit Margin 10.92% 0.29%

This company shows sharp decline in their Operating profit margin compared to the
previous year. In 2015, the company shows good performance in term of profit margin
because they able to generate 10% profit out of their sales but experienced bad performance
in 2016. Something should be done so that this margin is increase again in 2017
2. Return on Equity: Measures companys profitability by revealing how much profit a
company generates with the money shareholders invested.

Net Income
Formula=
Total Equity

Year 2015 2016


Return on Equity 1.67% 2.16%

The company show slight improvement in their return on equity compared to the prior year,
which indicates good performance in 2016. But in overall, this amount is not so convincing
because only about 2% of the net income come from shareholders equity.

Assets efficiency ratios: Measure the efficiency with which the firm uses its assets to
produce sales

1. Assets turnover: Measures how much sales or revenue is generated from their total assets

Sales
Formula=
Total Assets

Year 2015 2016


Assets turnover 61.5 58.6

The company shows slight decrease in term of assets turnover for the year 2016 compared to
the prior year. By assuming the companys total assets is constant(not changing), we can
conclude that the company also experience decrease in their total sales for the year.
Financial Leverage ratios: Measure company ability to meet their long term obligation

1. Debt Ratio: Measure how much of its assets is financed by their debt

Total Debt
Formula=
Total Assets

Year 2015 2016


Debt Ratio 77.5% 92.7%

The company shows sharp increase in their debt ratio for the year 2016 compared to prior
year. By assuming the total assets is constant(not changing), this ratio indicates that the
company increase their debt for 2016, which is not good. the company only show good
performance when debt ratio is less than 50%.