VERTICAL ANALYSIS

1. Asset management, or turnover, ratios:

a. Inventory turnover:
 Definition:
Inventory turnover is a financial ratio showing how many times a company has
sold and replaced inventory during a given period. A company can then divide the
days in the period by the inventory turnover formula to calculate the days it takes
to sell the inventory on hand.

 Formula:
Cost of goods sold
Inventory turnover =
Inventories

Changes Changes
  2017 2018 2019 (2018/2017 (2019/2018
) )

Cost of 35,753,175,886,70 46,085,422,009,49 44,980,140,698,28

0.29% -2.40%
goods sold 1 9 2

Inventorie
267,181,519,500 468,729,305,585 747,898,679,837 0.75% 59.56%
s

Inventory
133.8160512 98.31990759 60.14202446 -0.27% -38.83%
turnover

 Comment:
-
b. Receivables turnover:

 Definition:
 The receivables turnover ratio is an accounting measure used to quantify a
company's effectiveness in collecting its accounts receivable, or the money owed
by customers or clients. This ratio measures how well a company uses and
manages the credit it extends to customers and how quickly that short-term debt is
collected or is paid. A firm that is efficient at collecting on its payments due will
have a higher accounts receivable turnover ratio.

 Formula:
Sales
Receivables turnover =
Accounts receivable

Changes Changes
  2017 2018 2019 (2017/201 (2019/201
8) 8)

42,302,758,277, 53,577,241,462, 50,602,936,007,

Sales 26.65% -5.55%
806 140 389

Account
17,376,128,275, 20,849,971,711, 31,725,539,550,
receivabl 19.99% 52.16%
478 414 430
e

Receivabl
es 2.434533033 2.569655355 1.595022078 5.55% -37.93%
turnover

a. Fixed asset turnover:

 Definition:
The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure
operating performance. This efficiency ratio compares net sales (income
statement) to fixed assets (balance sheet) and measures a company's ability to
generate net sales from its fixed-asset investments, namely property, plant, and
equipment (PP&E).
 Formula:
 Sales
Fixed asset turnover= assets ¿
Net ¿

Changes Changes
  2017 2018 2019 (2017/201 (2019/201
8) 8)

42,302,758,277, 53,577,241,462, 50,602,936,007,

Sales 26.65% -5.55%
806 140 389
Fixed 1,528,720,840,6 1,646,373,479,9 1,304,424,116,7
7.70% -20.77%
assets 09 69 69
Fixed
asset
27.67199684 32.54258047 38.79331527 17.60% 19.21%
turnov
er

2. Profitability ratios:
a. Profit margin:

 Definition:

Profit margin is one of the commonly used profitability ratios to gauge the degree
to which a company or a business activity makes money. It represents what
percentage of sales has turned into profits.

 Formula:
Net income
Profit margin =
Sales

Changes Changes
  2017 2018 2019 (2017/201 (2019/201
8) 8)

Net
5,073,651,413,69 5,335,090,477,15 3,807,345,127,09
incom 5.15% -28.64%
8 5 4
e
42,302,758,277,8 53,577,241,462,1 50,602,936,007,3
Sales 26.65% -5.55%
06 40 89
Profit
margi 0.119936657 0.099577551 0.075239609 -16.97% -24.44%
n

b. Return on assets (ROA):

 Definition:

Return on assets (ROA) is an indicator of how profitable a company is relative to

its total assets. ROA gives a manager, investor, or analyst an idea as to how
efficient a company's management is at using its assets to generate earnings.
Return on assets is displayed as a percentage; the higher the ROA the better.

 Formula:
Net income
Return on assets =
Total assets

Changes Changes
  2017 2018 2019 (2017/201 (2019/201
8) 8)

Net
5,073,651,413,69 53,577,241,462,1 50,602,936,007,3
incom 955.99% -5.55%
8 40 89
e
Total 31,658,265,241,4 39,086,179,100,6 48,858,753,808,5
23.46% 25.00%
assets 24 69 11
ROA 0.16026309 1.37 1.04 754.84% -24.09%

c. Return on equity (ROE):

 Definition:

Return on equity (ROE) is a measure of financial performance calculated by

dividing net income by shareholders' equity. Because shareholders' equity is equal
to a company’s assets minus its debt, ROE is considered the return on net assets.
 ROE is considered a measure of the profitability of a corporation in relation to
stockholders’ equity.

 Formula:
Net income
Return on equity=
Total equity

Changes
Changes
2017 2018 2019 (2017/2018
(2019/2018)
)

Net
5,073,651,413,698 53,577,241,462,140 50,602,936,007,389 955.99% -5.55%
income
Total
10,594,134,518,111 14,038,503,236,582 14,902,831,830,061 32.51% 6.16%
equity
ROE 0.478911364 3.82 3.4 697.64% -10.99%

 Comment:
Profitability of VJC is on a downward trend. Specifically, changes in 2019 - 2018, ROE
was -10.99%, about 63 times lower than changes in 2017 - 2018; ROA in 2018 - 2019 is
31.3% lower than it was in 2017 – 2018. The company does not make as much profit in
2018 – 2019 as in 2017 – 2018. The profit margin of VJC decreased by 1.45% from 2017
to 2019.
The company needs to pay more attention to its financial health since all of its
profitability ratios is below safe level.