Accounting ratios

Apple K-12 report

 Liquidity ratios

-whether company has enough liquid assets to meet its

current liabilities
• Current ratio=total current assets/total current liabilities
• 2:1 [standard]
• 1.5-2.5 -> acceptable liquidity and efficient management of working
capital
• < 1-liquidity problems
• high-> too much working capital tied up in inventories and debtors
Year 2022 =135405/153982
=0.87935
Year 2021 =134,836/125,481
=1.074
Year 2020 =143,713/105,392
=1.3636
Year 2019 =162,819/105,718
=1.54
• 2019: 1.5
relatively healthy liquidity position
 sufficient current assets to cover short-term obligations.
• 2020: 1.3636
 slightly lower than the previous year
 reasonably strong liquidity position
• 2021: further decreased to 1.074
 deterioration in the company's liquidity position
 very close to the ideal threshold of 1
 company's current liabilities is close to exceeding its current assets
 concerns about its ability to meet short-term obligations
• 2022:decreased even further to 0.87935
 more pronounced decline in the company's liquidity position
 ratio below 1
 strain on the ability to cover short-term obligations (potential liquidity
risk)
• Quick ratio=(total current assets-inventories)/total current liabilities
• 1 [standard]
• sufficient liquid assets to cover its short-term liabilities
• Inventory-not quick-need sales order
Year 2022 =(135405-4946)/153982
=0.847
Year 2021 =(134,836-6580)/125,481
=1.022
Year 2020 =(143,713-4061)/105,392
=1.325
Year 2019 =(162,819-4106)/105,718
=1.501
• 2019: 1.501
relatively strong liquidity position
sufficient quick assets to cover short-term obligations.
• 2020: decreased to 1.325
slight decrease compared to the previous year.
reasonably healthy liquidity position
• 2021: further decreased to 1.022
potential deterioration in the company's liquidity position
• 2022: decreased further to 0.847
more pronounced decline in the company's liquidity position
ratio below 1
potential strain on the company's ability to cover short-term obligations
using quick assets
• decreasing trend
• decreasing ability to cover its short-term obligations using its quick assets
 Capital structure ratio

- how a company is financed

-proportion of debt and equity in its overall capitalization
• Debt to equity ratio=long term debt/shareholder’s equity
• extent to which equity can cover debt obligations
• <0.5-> lower risk
• <1- >reasonable
• 1-2->typical
• >2-> need to be cautious
Year 2022 =98959/50672
=1.95
Year 2021 =109106/63090
=0.173
Year 2020 =98667/65339
=1.51
Year 2019 =91807/90448
=1.015
• 2019: 1.015
slightly more long-term debt compared to its equity
more reliance on debt financing for its long-term capital structure
• 2020: increased to 1.51
higher proportion of long-term debt relative to equity.
reliance
• 2021: decreased significantly to 0.173
indicates a lower proportion of long-term debt compared to equity
reduction in reliance
• 2022: increased again to 1.95
• fluctuations in the company's capital structure over the years
• reliance on debt financing increased from 2019 to 2020
• decreased signi ficantly in 2021
• another increase in 2022
• Debt to capital ratio=long term debt/total capital
• relationship between a company’s total obligations and
capital
• determines debt proportion in the capital
Year 2022 =98959/(50672+98959)
=0.6614
Year 2021 =109106/(63090+109106)
=0.6636
Year 2020 =98667/(65339+98667)
=0.6016
Year 2019 =91807/(90448+91807)
=0.5037
• 2019: 0.5037
50.37% of the company's capital structure was financed by debt
moderate level of debt reliance in the company's capital structure
• 2020: increased to 0.6016
60.16% of the company's capital structure was financed by debt
increase in debt reliance
• 2021: increased to 0.6636
moderate level of debt reliance
• 2022: decreased to 0.6614
slight reduction in the company's debt reliance
• moderate to high level of debt reliance in the company's capital structure
throughout the years
• ratio hovers around 60% to 66%
• significant portion of the capital structure being financed by debt
 Turnover ratio

-how well a company is generating sales or revenue in relation to a specific resource or

asset
• Receivable turnover ratio=Net sales/Receivable
• higher -> company is collecting payments from its customers more quickly

Year 2022 =394328/28184

=13.99
Year 2021 =365817/26728
=13.6866
Year 2020 =274515/16120
=17.029
Year 2019 =260174/22926
=11.348
• 2019: 11.348
payments collected from its customers approximately 11.348 times during the year
moderate frequency of collecting receivables
• 2020: increased to 17.029
improvement in the collection efficiency
Payments were collected approximately 17.029 times during the year
higher turnover of receivables
• 2021: decreased to 13.6866
slightly lower than the previous year
relatively efficient collection of receivables
• 2022: increased slightly to 13.99
reasonably efficient collection of payments from customers
• company has generally shown an efficient collection of receivables over the
years
• the faster the company collects payments from its customers, it improves cash
flow and reduces the risk of bad debts.
• Inventory turnover ratio=COGS/average inventory
• how many times a company sells and replaces its inventory
• Low-> low sales or overstock
• Supermarket-high & fashion stores-low
Year 2022 =223546/4946
=45.197
Year 2021 =212981/6580
=32.368
Year 2020 =169559/4061
=41.75
Year 2019 =161782/4106
=39.4013
• 2019: 39.4013
sold and replaced its inventory approximately 39.4013 times
high turnover of inventory
• 2020: increased to approximately 41.75
improvement in inventory management
higher turnover compared to the previous year
• 2021: decreased slightly to approximately 32.368
reasonably efficient turnover of inventory
• 2022: significantly increased to approximately 45.197
improvement in inventory management efficiency
company has generally shown a relatively efficient turnover of inventory over
the years
effectively managing its inventory
avoiding excessive stockpiling
responding to customer demand
• Inventory turnover days=365*(1/inventory turnover ratio)
• average number of days it takes for a company to sell its inventory
• lower is better
Year 2022 =365*45.1973
=56.4 days
Year 2021 =365*32.3679
=51.391 days
Year 2020 =365*41.753
=49.7875 days
Year 2019 =365*39.4014
=64.2588 days
• 2019: 64.2588 days
takes 64.2588 days to sell and replace its inventory during
the year
• 2020: decreased to approximately 49.7875 days
improvement in inventory turnover
reduced the average number of days it took to sell and
replace its inventory
• 2021: increased to approximately 51.391 days
still a relatively efficient turnover of inventory
• 2022: increased to approximately 56.14 days
company was able to sell and replace its inventory less
quickly but still efficient
• Shareholder’s equity turnover ratio=Net sales/Shareholder’s equity
• how effectively a company generates sales revenue relative to the amount of equity
invested by its shareholders
• low-underutilization of shareholder’s equity
• high-aggressive leveraging
Year 2022 =394328/50672
=7.78197
Year 2021 =365817/63090
=5.798
Year 2020 =274515/65339
=4.2014
Year 2019 =260174/90488
=2.875
• Year 2019: approximately 2.875
company generated sales revenue approximately 2.875 times
relative to the average shareholder's equity
moderate turnover of equity in generating sales
• Year 2020: 4.2014
improvement in company’s ability to generate sales relative to equity
• Year 2021: increased to approximately 5.798
continued improvement in the company's ability to generate sales
relative to shareholder's equity
• Year 2022: increased to approximately 7.78197
• shown improvements in generating sales relative to shareholder's equity
over the years
• utilizing equity more efficiently to generate sales revenue
 Profitability ratio

-provides insight into the company's performance in generating earnings relative to its
sales, assets, and equity
• Gross profit margin=(Gross profit/Net sales)*100%
• measures the percentage of revenue left after deducting the cost of
goods sold
Year 2022 =170782/394328
=43.3096%
Year 2021 =152836/365817
=41.7794%
Year 2020 =104956/274515
=38.2333%
Year 2019 =98392/260174
=37.8187%
• Year 2019: approximately 37.8187%
for every dollar of revenue generated, the company had a gross
profit of around 37.8187 cents after deducting the cost of goods sold
• Year 2020: increased to approximately 38.2333%
able to maintain a relatively stable gross profit margin
effective cost management
• Year 2021: increased to approximately 41.7794%
might have implemented more favorable pricing strategies
• Year 2022: increased to approximately 43.3096%
further improvement in the company's ability to generate profit from
each dollar of revenue
positive trend of improving profitability over the years
company has been able to manage its costs effectively
increase its pricing power
• Operating margin=(Operating profit/Net sales)*100%
• represents the percentage of revenue remaining after deducting both
the cost of goods sold and operating expenses
Year 2022 =119437/394328
=30.2887%
Year 2021 =108949/365817
=29.7824%
Year 2020 =66288/274515
=24.1473%
Year 2019 =63930/260174
=24.572%
• Year 2019: approximately 24.572%
for every dollar of revenue generated, the company had an operating
profit of around 24.572 cents after deducting all operating expenses
• Year 2020: decreased to approximately 24.1473%
able to maintain a relatively stable operating profit margin
effective cost management
• Year 2021: increased to approximately 29.7824%
company improved its operating efficiency
• Year 2022: increase to approximately 30.2887%
effective cost management or increased revenue generation from core
operations
• positive trend of improving profitability in the company's core operations
over the years
• manage its operating expenses effectively
• increase its operating revenue
• Net income margin=(Net profit after tax/Net sales)*100%
• indicates the percentage of revenue remaining after deducting COGS,
operating expenses, taxes and other non-operating costs
Year 2022 =99803/394328
=25.3096%
Year 2021 =94680/365817
=25.8818%
Year 2020 =57411/274515
=20.9136%
Year 2019 =55256/260174
=21.2331%
• Year 2019: approximately 21.2331%
for every dollar of revenue generated, the company had a net income
of around 21.2331 cents after deducting all expenses, including taxes
• Year 2020: decreased to approximately 20.9136%
able to maintain a relatively stable net income margin
effective cost management
• Year 2021: increased to approximately 25.8818%
company improved its profitability
• Year 2022: decreased slightly to approximately 25.3096%
positive trend of improving profitability and efficiency in generating net
income over the years
able to manage its expenses effectively
increase its revenue generation
higher net income margins