Ratio Analysis and Interpretation of “Yum”

PROFITABILITY ANALYSIS

 The Gross Profit ratio shows a increasing trend; which reflects its inherent ability to sell
well above its cost of production.
 The Net profit ratio also shows a rising trend; which may be because of its pricing power
and superior control of production costs.

LIQUIDITY ANALYSIS

 The liquidity ratios shows a increasing trend which implies that there is no cause of
concern for Yum’s liquidity.

STABILITY ANALYSIS

 The Debt equity ratio and Proprietary ratio shows a negative figure in the year 2016; that
raises concern about Yum’s ability to service its debt. Also the Fixed assets ratio shows a
negative trend. However, considering increasing trend in the ratio of current assets to
fixed assets, the solvency risk may be controlled.

INVESTMENT ANALYSIS

 The Return on Capital and Return on shareholder’s fund shows a declining trend, because
of which Yum should rethink its investment decisions.
 However, the Return on Total Assets shows a growing trend; which might happen
because Yum has put emphasis mainly on acquiring assets rather than any other
investment; as we have also seen that the ratio of Current assets to Fixed assets was
higher than other Stability ratios.

TURNOVER ANALYSIS

 The Turnover ratios shows a growing trend; which means that Yum’s turnover on Fixed
assets, total assets, capital employed and working capital doesn’t have much cause of
concern in these three years.

COVERAGE ANALYSIS

 The Coverage ratio shows a decreasing trend, which would be a cause of concern for
Yum’s creditors.
 Also, we have seen a decreasing trend in the Payout ratio, that shows its inability to pay
out its dividend.