Analisis Rasio: The Star Logo, and South-Western Are Trademarks Used Herein Under License

Analisis Rasio
COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson,

the Star logo, and South-Western are trademarks used herein under license.
Accounts Receivable Turnover
Net Sales
Average Gross Receivables
• Indicates the liquidity of receivables

• Determining average gross receivables
– End of year and beginning of year base points for
average mask seasonal fluctuations
– Internal analysis: use monthly or weekly amounts
– External analysis: use quarterly data
Chapter 6, Slide #2
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Days’ Sales in Receivables
Gross Receivables
 Net Sales 
 
 365 
• Should mirror the company’s credit terms
• Reading reflects end-of-year status of receivables
– Use of the natural business year (lower sales at year-end) can
understate result
• Compare
– Firm data for several years
– Other industry firms and industry averages
Chapter 6, Slide #3
Inventory Cost
• Cost flow assumptions

– FIFO (first-in, first-out)
– LIFO (last-in, first-out)
– Average
Chapter 6, Slide #4
Liquidity of Inventory
• Number of days’ sales in inventory

• Inventory turnover in times per year
• Inventory turnover in days
Chapter 6, Slide #5
Days’ Sales in Inventory
Ending Inventory
 Cost of Goods Sold 
 
 365 
• Indicates the length of time needed to sell all inventory on hand
• Use of a natural business year
– Understates number of day’s sale in inventory
– Overstates liquidity of inventory
• Implications of extremes
– High: excessive inventory for sales activity
– Low: inventory shortage and lost sales
Chapter 6, Slide #6
Inventory Turnover
Cost of Goods Sold
Average Inventory
• Indicates the liquidity of inventory
• Determining average inventory
– End of year and beginning of year base points for
average mask seasonal fluctuations
– Internal analysis: use monthly or weekly amounts
– External analysis: use quarterly data
Chapter 6, Slide #7
Inventory Turnover Comparison Issues
• Use caution when comparing a mix of natural

and calendar year companies
• Cost flow assumption issues
– LIFO yields lower inventory value and higher
inventory turnover
• Inter-industry comparisons may not be
reasonable
Chapter 6, Slide #8
Inventory Inventory
Turnover in Days Turnover per Year
Average Inventory 365

 Cost of Goods Sold  Inventory Turnover
 
 365  in Days
Chapter 6, Slide #9
Current Assets: Operating Cycle
• The time period between acquisition of goods

and the final cash realization from sales
Accounts Reciveable Inventory
Operating Cycle = Turnover + Turnover
in Days in Days
• Subject to potential understatement from
understatement of turnover measures
– Use of LIFO
– Use of a natural business year
– Averages are computed on beginning-of-year and end-of-year
data
Chapter 6, Slide #10

Working Capital
Current Assets
– Current Liabilities
= Working Capital
• Subject to understatement if certain assets are

understated (i.e., LIFO inventory)
• Inter-firm comparison is of no value

Acid-Test (Quick)
Current Ratio
Ratios
Current Assets Current Assets - Inventory
Current Liabilities Current Liabilities
 Cash Equivalents 
 + Marketable Securities 
 + Net Receivables 
 
Current Liabilities

Cash Ratio
Cash Equivalents + Marketable Securities
Current Liabilities
• Extremely conservative
– Unrealistic for a firm to have sufficient cash and
securities to cover all its current liabilities
• Appropriate context
– Firms with naturally slow-moving inventory and
receivables
– Firms that are highly speculative

Sales to Working Capital
Sales
Average Working Capital
• Measures the turnover of working capital per year
• Compare with
– Historical data
– Industry competitors
– Industry averages
• Assessment
– Low: potentially unprofitable use of working capital
– High: potential undercapitalization

Long-Term
Debt-Paying Ability

Times Interest Earned
Recurring Earnings, Excluding Interest

Expense, Tax Expense, Equity Earnings,
and Minority Earnings
Interest Expense, Including Capitalized Interest
• Comparisons
– 3 to 5 years of historical data
• Lowest value is the primary indicator of interest coverage
– Industry competitors and averages

Times Interest Earned (cont’d)
• Comparisons
– 3 to 5 years of historical data
• Lowest value is the primary indicator of interest coverage

Fixed Charge Coverage
Recurring Earnings, Excluding Interest

Expense, Tax Expense, Equity Earnings,
and Minority Earnings
+ Interest Portion of Rentals
Interest Expense, Including Capitalized Interest
+ Interest Portion of Rentals
• Ratio trend is usually similar to trend of times-

interest-earned ratio

Debt Ratio
Total Liabilities
Total Assets
• Indicates the percentage of assets financed by creditors
• Comparisons
• Variations in application
– Exclude short-term liabilities if NOT part of long-term source of
funds
– Liabilities that do not necessarily represent a commitment to
pay out funds in the future

Debt/Equity Ratio
Total Liabilities
Shareholders' Equity
• Helps determine how well creditors are

protected in case of insolvency
• Comparisons

Debt to Tangible Net Worth Ratio
Total Liabilities
Shareholders' Equity - Intangible Assets
• Determines the entity’s long-term debt payment ability

• Indicates how well creditors are protected in case of
the firm’s insolvency
• More conservative than debt ratio or debt/equity ratio
due to exclusion of intangibles

Profitability

Net Profit Margin
Net Income Before Minority Share of Earnings,

Equity Income, and Nonrecurring Items
Net Sales
• Also referred to as return on sales

• Reflects net income dollars generated by each dollar of sales
• Potential distortion
– Net “other” income or loss

Total Asset Turnover
Net Sales
Average Total Assets
• Measures the activity of the assets and the

ability of the firm to generate sales through the
use of the assets
• Potential distortion
– Investments
– Construction in progress
– Other assets that do not relate to net sales

Operating Income Margin
Operating Income
Net Sales
• Use operating income in the numerator

Operating Asset Turnover
Net Sales
Average Operating Assets
• Measures the ability of operating assets to

generate sales dollars

Sales to Fixed Assets
Net Sales
Average Net Fixed Assets
• Measures the ability to make productive use of

property, plant, and equipment by generating
sales dollars
– Exclude construction in progress
• Possible distortions
– Old fixed assets
– Labor-intensive industry

Return on Assets
Net Income Before Minority Share

of Earnings and Nonrecurring Items
Average Total Assets
• Measures the ability to utilize assets to create

profits
• Average total assets
– Internal analysis: month-end amounts
– External analysis: beginning and ending amounts
– If necessary, consistent use of end-of-year amounts

Return on Investment (ROI)
Net Income Before Minority Share of

Earnings and Nonrecurring Items
+  Interest Expense    1-Tax Rate  
Average  Long-Term Liabilities + Equity 
• Measures the earnings on investment and

indicates how well the firm utilizes its asset
base
• Evaluates enterprise performance

Return on Operating Assets
Operating Income
Average Operating Assets
• Measures the ability of operating assets to

generate operating income

Return on Total Equity
Net Income Before Nonrecurring Items

- Dividends on Redeemable Preferred Stock
Average Total Equity
• Measures the return to common and preferred

stockholders
• Adjustments for redeemable preferred stock
– Deduct dividends from net income (numerator)
– Deduct stock value from total equity (denominator)

Return on Common Equity
Net Income Before Nonrecurring Items

- Preferred Dividends
Average Common Equity
• Measures the return to the common

stockholder
• Common equity:
Total stockholders’ equity
less preferred capital
less minority interest reported as equity

The Relationship Between Profitability
Ratios
Measures
Rate of return to
return on providers of Typical result
Assets All funds Lowest (includes all assets)
Investment Long-term funds Higher than ROA (relative small
amount of short-term funds)
Total equity Equity Higher than ROI (measures return only
to shareholders)
Common equity Common equity Highest
• Common shareholders absorb
greatest degree of risk
• Requires that return to preferred
shareholders exceed funds paid to
preferred shareholders
Gross Profit Margin
Gross Profit
Net Sales
Sales
Beginning Inventory
– Cost of Goods Sold + Purchases of Inventory
– Ending Inventory
= Gross Profit

Segment Reporting
• Operating segments
– Separate financial information is available
– Evaluated by the chief decision making officer
• Geographical information
– Revenues earned
– Asset concentration
• Major customers
• Products and services


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Analisis Rasio

COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson,

• Indicates the liquidity of receivables

• Cost flow assumptions

• Number of days’ sales in inventory

• Use caution when comparing a mix of natural

Average Inventory 365

• The time period between acquisition of goods

Chapter 6, Slide #10

• Subject to understatement if certain assets are

Chapter 6, Slide #11

Chapter 6, Slide #12

Chapter 6, Slide #13

Chapter 6, Slide #14

COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson,

Recurring Earnings, Excluding Interest

Chapter 7, Slide #16

Chapter 7, Slide #17

Recurring Earnings, Excluding Interest

• Ratio trend is usually similar to trend of times-

Chapter 7, Slide #18

Chapter 7, Slide #19

• Helps determine how well creditors are

Chapter 7, Slide #20

• Determines the entity’s long-term debt payment ability

Chapter 7, Slide #21

COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson,

Net Income Before Minority Share of Earnings,

• Also referred to as return on sales

Chapter 8, Slide #23

• Measures the activity of the assets and the

Chapter 8, Slide #24

• Use operating income in the numerator

Chapter 8, Slide #25

• Measures the ability of operating assets to

Chapter 8, Slide #26

• Measures the ability to make productive use of

Chapter 8, Slide #27

Net Income Before Minority Share

• Measures the ability to utilize assets to create

Chapter 8, Slide #28

Net Income Before Minority Share of

• Measures the earnings on investment and

Chapter 8, Slide #29

• Measures the ability of operating assets to

Chapter 8, Slide #30

Net Income Before Nonrecurring Items

• Measures the return to common and preferred

Chapter 8, Slide #31

Net Income Before Nonrecurring Items

• Measures the return to the common

Chapter 8, Slide #32

Chapter 8, Slide #34

Chapter 8, Slide #35

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