FINANCIAL ANALYSIS REPORT

LIQUIDITY RATIOS
Current Ratio
The current ratio of year 2018 is decreased as compared to 2017 because in 2018
current liabilities are more than the current assets which indicate that the company’s
ability to pay-off the current liabilities through current assets is less as compared to
2017 in which the current ratio is comparatively better although still not meeting the
normative value of current ratio of 2.

Quick Ratio
The quick ratio is almost same with a minute increase of 0.03 in 2018 which shows
in 2018 company has greater number of quick assets to pay off its current debts. But
the difference in not much because as quick assets are more in 2018, current
liabilities also increased in 2018 so company has greater amount of current debts
which are to be payed.

Cash Ratio
The cash ratio is also almost same with increase of 0.008 because there is greater net
increase in cash and cash equivalence in 2018 as compared to 2017 and this increase
is due to a greater increase in working capital in 2018. As the current liabilities also
increase in 2018 as compared to 2017 so ratio is balanced.

Defensive Interval Ratio

The DIR ratio is increased which indicates that in 2018 company can operate a
greater number of days without running into any financial difficulty. This ratio
clearly shows that in 2018 company’s financial condition is better due to increase in
cash which in turn increase DIR.
 PROFITABILITY RATIOS
Gross Profit Ratio
The GP ratio is decreased in 2018 because net sales decreased in 2018 as local
sales of products is less as compared to 2017 and also there is a sufficient decrease
in gross profit. Moreover, cost of sales of finishing goods is increased in 2018
which also contribute to decrease in gross profit there by decreasing GP ratio.

Operating Profit/EBIT Ratio

The EBIT ratio is decreased in 2018 because company has operating loss rather
then operating profit due to increase in selling an administrative expense, major
reason is less GP which also contribute to operating loss. In 2017 company has
operating profit which increases its EBIT ratio as compared to 2018. So, profit
generation efficiency of company in 2018 is less compared to 2017.
EBT Ratio
The EBT ratio is also decreased in 2018 and the reason is same as sales, GP, EBIT
are less in 2018 as compared to 2017 so these factors also causes a decline in EBT
ratio. Moreover, company has greater interest expense in 2018 which also causes
Loss in EBT.

NI & PAOS Ratio

The NI ratio and PAOS ratio are same as company has no preference dividend in
both years. Both of these ratios are also decreased in 2018 due to less sales, greater
cost of sales and less GP, EBT, EBIT in 2018 so company also suffered from loss in
NI and PAOS in 2018 where as in 2017 it earns a greater profit in NI and PAOS.

Return On Assets Ratio

The ROA ratio is decreased in 2018 as compared to 2017 which shows that company
can get less profit from its assets in 2018 as company experienced loss in NI which
causes decrease in ROA although its average total assets are more in 2018 as
compared to 2017.

Return On Equity Ratio

The ROE is also decreased because common equity is less in 2018 as company has
greater liabilities in 2018 and company undergo loss in NI which cause major
decrease in ROE ratio. Whereas in 2017 it has more common equity and a sufficient
profit in NI. So, in 2018 the company generated less profit for shareholders.

PERFORMANCE RATIOS
Assets Turnover Ratio
Asset turnover ratio is decreased in 2018 which indicates that company is not
utilizing its assets efficiently to generate profit that’s why sales are less. As, in 2018
inventory is also increased which shows that company is not making more sales. In
2017 sales are better and assets are less which shows that company is generating
considerably better profit from its assets in 2017.

Account Receivables Turnover Ratio

Account receivables turnover ratio is decreased in 2018 as compared to 2017 which
shows that company is making greater credit sales, not collecting receivables on time
thereby not converting credit sales into cash as company’s account receivables are
increased by a larger amount in 2018 and sales are not increased. Where as in 2017
company make less credit sales.

Average Collection Ratio

Average Collection Ratio is greater as compared to 2018 which shows that in 2018
company is not collecting receivables on time and also it is making greater credit
sales which cause an increase in collection period of account receivables. Whereas
in 2017 company’s collection period is better indicating the timely collection of
account receivables and not making much credit sales.

Account Payables Turnover Ratio

Account Payables Turnover Ratio is decreased in 2018 by larger value which
indicates that in 2018 company’s account payables are increased and it takes
company a longer time to pay off its debts then in 2017.

Average Payment Period

Average Payment Period is increased in 2018, indicating that it takes company a
longer time to pay back to suppliers as compared to 2017. Moreover, company’s
account payables and cash are also increased in 2018 that’s why its payment is period
is more in 2018.
Inventory Turnover Ratio
Inventory Turnover ratio is also decreased in 2018 by a small value which indicates
that company is not selling inventory as sales are also deceased in 2018, so, company
is keeping inventory items for a longer time than in 2017 thereby decreasing
inventory turnover ratio.

Inventory Days On Hand

Inventory Days on hand are also increased in 2018 which further elaborate the fact
that company keeps inventory for a long period without selling as compared to 2017
in which it takes comparatively less number of days to sell inventory thereby
decreasing speed of generating sales from inventory.

Times Interest Ratio

Times Interest ratio is decreased in 2018 by a significant value and the major reason
is experiencing operating loss in 2018 and an appreciable profit in 2017. Difference
in EBIT values causes a considerable difference in times interest ratio as interest
expenses are almost same so they do not affect times interest ratio.

SOLVENCY RATIOS
Debt To Equity Ratio
Debt to equity ratio is increased in 2018 which shows that in 2018 company is
financed more by creditors rather than its own financial sources as in 2018 long term
finances are increased and common equity is also decreased which contributes to
increase in D/E ratio of 2018.

Debt To Assets
Debt to assets is also increased significantly in 2018 due to a greater increase in total
assets. Although this ratio is also greater in 2017 as it is better to have asset to equity
ratio as low as possible. The increase in this ratio shows that company takes higher
amount of debts in 2018 and a major portion of its assets are funded with debts rather
than equity.
 INVESTOR RATIOS
Earnings Per Share
Earnings per share is exceptionally dropped in 2018 as company has experienced
loss per share rather earnings. This significant decline is due to loss in NI in 2018
which indicates that per share value is decreased by a greater extent in 2018 and
company is not generating profit as it is shown by NI.

Dividends Per Share

The dividends per share are same in both years as neither the company’s dividends
are increasing nor the number of shares indicating that no more investors are
investing in company in 2018.

Dividend payout ratio

Dividend payout ratio is decreased in 2018 because company has loss per share
which indicates that company can pay only a minute amount of profit as dividends
in 2018 as compared to 2017.