Financial Analysis

1. SUMMARY OF RATIO ANALYSES
Type of
Ratio
Formula Values in Php
20AA
20BB
Ratio Analysis
A. Liquidity
Ratio
1. Current ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
100,000/39250
94,500/45,000
2.55:1
2.10:1
Firm’s ability to meet
short-term
obligations
𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
45,000/39250
43200/45000
1.15:1
.96:1
Firm’s ability to meet
sudden and
immediate demands
on current assets.
Quick assets = cash,
marketable
securities, accounts
receivable, net

2. Type of
Ratio
Formula Values in Php
20AA
20BB
Ratio Analysis
B. Activity
Ratio
1. Inventory
turnover
𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
300,000/25,000
200,000/25,000
12 times
8 times
Number of times
the merchandise
inventory was sold
and replenished
during the period
2. Days of
sales in
inventory
Number of days in a
period/Inventory
turnover
365/12
365/8
30.22 days
45.63 days
Number of days
inventory is sold,
from date
acquired
3. Accounts
receivable
turnover
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
200,000/20,000 10 times Number of times
receivables have
been realized in
sales
4. Average
collection
period
Number of days in
year/Receivable
turnover
360/10 36 days Average number of
days it takes to
collect receivables

3. Type of
Ratio
Formula Values in Php
20AA
20BB
Ratio Analysis
5. Asset
turnover
a. Fixed
asset
turnover
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
200,000/67,500 2.96 How effectively fixed
assets have been
utilized to generate
sales revenue
b. Total
assets
turnover
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
200,000/187,250 1.07 Ability of the firm
generating revenues;
a measure of
investment
efficiency
C. Leverage
Ratios
1. Equity to
debt ratio
𝑂𝑤𝑛𝑒𝑟′
𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
100,750/99,250
79,500/95,000
1.02
.84
Shows the
relationship
between investors
contributions and
debt of the firm

4. Type of
Ratio
Formula Values in Php
20AA
20BB
Ratio Analysis
2. Debt ratio 𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
99,250/200,000
95,000/174,500
.50
.54
Proportion of assets
provided by
creditors
D.
Profitability
Ratios
1. Gross profit
margin
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
𝑆𝑎𝑙𝑒𝑠
180,000/300,000
100,000/200,000
60%
50%
Gross profit
percentage on sales
to recover operating
expenses
2. Operating
profit margin
Earnings (before
interest and taxes) /
Sales
55,000/300,000
40,000/200,000
.18
.20
Operating profit
percentage per peso
of sales
3. Net profit
margin
Net profit (earnings
after interest and
taxes) / Sales
35,750/300,000
26,000/200,000
.12
.13
Profit percentage
per peso of sales

5. Type of
Ratio
Formula Values in Php
20AA
20BB
Ratio Analysis
4. Return on
assets
Net profit (earning after
interest and taxes) /
average total assets
26,000/187,250 14% Overall assets
productivity
5. Return on
equity
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑜𝑤𝑛𝑒𝑟′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦
26,000/90,125 29% Rate of net income
earned based on
owner’s equity

6. MARKETVALUES
A firms’s value is related to what an investor will pay for its
stock. If demand for the stock increases, then its price will also
increase, wherein its increase in share price can be tied to
expectation of increased in future earnings. Some of the tools that
determine share prices are book value and earnings per share.
Book value is the basis for the fairly determining the worth
of the assets in relation to a holder’s share, upon liquidation of the
firm.
𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

7. Earnings per share aims to identify the valid earnings
per share value, by looking at trends over time or the earnings
of other companies in the same industry.
𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 =
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
𝑃𝑟𝑖𝑐𝑒−𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑟𝑎𝑡𝑖𝑜 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑠𝑡𝑜𝑐𝑘
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒