RATIO ANALYSIS OF NOKIA

Dedication I dedicating my valuable project to our parents, Prof’s, friends and to the whole class. Acknowledgement I thank to our Allah AL-Mighty and off course thankful to our honorable teacher who has always been guiding us in a good way through understanding this course as well as the whole project. He has given us an opportunity to show abilities in the subject. I also like to thank our class mates because of their friendly attitude and maintaining lovely environment in the class. Income statement Period EndingSep 30, 2009Sep 30, 2008Sep 30, 2007AssetsCurrent AssetsCash And Cash Equivalents74,591 14,899 52,746 Short Term Investments- 57,210 31,057 Net Receivables150,046 198,959 177,669 Inventory117,318 231,479 163,196 Other Current Assets26,828 59,361 42,667 Total Current Assets 368,783 561,908 467,335 Long Term Investments44,973 43,314 45,436 Property Plant and Equipment859,990 826,990 805,064 Goodwill- - 33,595 Intangible Assets- - - Accumulated Amortization- - - Other Assets482,999 340,443 289,723 Deferred Long Term Asset Charges5,273 - - Total Assets 1,762,018 1,772,655 1,641,153 LiabilitiesCurrent LiabilitiesAccounts Payable141,168 454,775 401,051 Short/Current Long Term Debt129,800 160 40,160 Other Current Liabilities28,172 24,269 32,454 Total Current Liabilities 299,140 479,204 473,665 Long Term Debt389,240 389,181 355,522 Other Liabilities300,412 194,563 157,946 Deferred Long Term Liability Charges256,196 222,761 225,068 Minority Interest- - - Negative Goodwill- - - Total Liabilities 1,244,988 1,285,709 1,212,201 Stockholders' EquityMisc Stocks Options Warrants- - - Redeemable Preferred Stock- - 627 Preferred Stock- 467 - Common Stock517,030 21,993 21,646 Retained Earnings- 312,808 268,761 Treasury Stock- - - Capital Surplus- 147,241 136,061 Other Stockholder Equity- 4,437 1,857 Total Stockholder Equity 517,030 486,946 428,325 Net Tangible Assets $517,030 $486,946 $394,730 Period EndingSep 30, 2009Sep 30, 2008Sep 30, 2007Total Revenue 1,895,198 2,208,973 2,021,594 Cost of Revenue27,818 1,962,870 797,924 Gross Profit 1,867,380 246,103 1,223,670 Operating ExpensesResearch Development- - - Selling General and Administrative1,705,565 99,453 1,084,324 Non Recurring- - - Others36,751 35,303 34,080 Total Operating Expenses- - - Operating Income or Loss 125,064 111,347 105,266 Income from Continuing OperationsTotal Other Income/Expenses Net1,453 1,881 6,812 Earnings Before Interest And Taxes126,517 113,228 112,078 Interest Expense29,746 29,477 37,229 Income Before Tax96,771 83,751 74,849 Income Tax Expense32,509 26,190 25,035 Minority Interest- (35)(43)Net Income From Continuing Ops64,247 57,526 49,771 Non-recurring EventsDiscontinued Operations- 20,396 - Extraordinary Items- - - Effect Of Accounting Changes- - - Other Items- - - Net Income 64,247 77,922 49,771 Preferred Stock And Other Adjustments(15)- - Net Income Applicable To Common Shares $64,232 $77,922 $49,771 Ratio Analysis Liquidity Ratio: 
20082009Current Ratio:Current Ratio=CurrentAssetsCurrent Liability Current Ratio=$561,908 $479,204 Current Ratio:Current Ratio=CurrentAssetsCurrent Liability Current Ratio=$368,783 $299,140 Current Ratio=1.17%Current Ratio=1.23%
Interpretation: Current ratio measures whether or not a company has enough resources to pay its debt over the next business cycle. The higher the current ratio is, the more capable the company is to pay its obligations. In 2009 current ratio is comparatively below than the previous year. In 2009 current liabilities exceed current assets. This shows that the company may have problems paying its bills on time. 
20082009Quick Ratio:Quick Ratio=CurrentAssets-InventoryCurrent Liability Quick Ratio=$561,908 -$231,479 $479,204 Quick Ratio:Quick Ratio=CurrentAssets-InventoryCurrent Liability Quick Ratio=$368,783 -$117,318 $299,140 Quick Ratio=0.68%Quick Ratio=0.84%
Interpretation: Quick Ratio is also known as the " acid test" ratio; it is a refinement of the current ratio and is a more conservative measure of liquidity. The ratio expresses the degree to which a company's current liabilities are covered by the most liquid current assets. The quick ratio is incresing from previous year. It seems that company caring asses liabilities. Profitability Ratio: 
20082009Gross Profit Margin:Gross Profit Margin=Gross ProfitNet Sale×100Gross Profit Margin=$246,103 $2,208,973 ×100Gross Profit Margin:Gross Profit Margin=Gross ProfitNet Sale×100 Gross Profit Margin=$1,867,380 $1,895,198 ×100Gross Profit Margin=11.14%Gross Profit Margin=98.53%
Interpretation: Gross profit margin measures company's manufacturing and distribution efficiency during the production process. Gross profit increases from 2008 to 2009 .The cost of goods sold slightly increase as compare to previous.. 
20082009Operating Profit Margin:Operating Profit Margin=Operating ProfitNet Sale×100Operating Profit Margin=$111,347 $2,208,973 ×100Operating Profit Margin:Operating Profit Margin=Operating ProfitNet Sale×100 Operating Profit Margin=$125,064 $1,895,198 ×100Operating Profit Margin=5.04%Operating Profit Margin=6.60%
Interpretation: Operating margin is used to measure company's pricing strategy and operating efficiency. Operating profit is increasing as compare to previous year. It shows that the company is earning more on per dollar of Sale. This high profit also shows that sales are increasing faster than cost and the firm is in a relatively liquid position. 
20082009Net Profit Margin:Net Profit Margin=Net Profit After TaxNet Sale×100 Net Profit Margin=$77,922 $2,208,973 ×100Net Profit Margin:Net Profit Margin=Net Profit After TaxNet Sale×100 Net Profit Margin=$64,247 1,895,198 ×100Net Profit Margin=3.52%Net Profit Margin=3.38%
Interpretation: There is little bit decrease in the net profit margin which is a good sign of company efficiency and also shows that company reduces its expense. Increase in net profit also indicates that company efficiently converts its revenue into actual profit. 
20082009Return on Total Assets:Return on Total Assets=Net Profit After TaxTotal Assets×100Return on Total Assets=$77,922$1,772,655 ×100Return on Total Assets:Return on Total Assets=Net Profit After TaxTotal Assets×100 Return on Total Assets=$64,247 $1,762,018 2×100Return on Total Assets=4.39%Return on Total Assets=3.64%
Interpretation: Return on Assets shows how many dollars of earnings result from each dollar of assets the company controls. Return on total assets decrease from 4.39% to 3.64% which indicate that company is not efficiently use its assets to generate profit. 
20082009Return on Total Equity:Return on Total Equity=Net Profit After TaxTotal Equity×100Return on Total Equity=$77,922$486,946 ×100Return on Total Equity:Return on Total Equity=Net Profit After TaxTotal Equity×100 Return on Total Equity=$64,247 $517,030 ×100Return on Total Equity=16.00%Return on Total Equity=12.43%
Interpretation: Return on Equity is also referred as Stockholder's return on investment, it tells the rate that shareholders are earning on their shares. LG is earning a very low on shareholder's equity as compare to the previous year. It shows the weakness of company.. Debt Ratio: 
20082009Time Interest Earned Ratio:Time Interest Earned Ratio=EBITInterestTime Interest Earned Ratio=$111,347 $29,477 Time Interest Earned Ratio:Time Interest Earned Ratio=EBITInterest Time Interest Earned Ratio=$125,064 $29,746 Time Interest Earned Ratio=3.77 TimesTime Interest Earned Ratio=4.20 Times
Interpretation: Time interest earned ratio also known as interest coverage ratio. Times Interest Earned is a great tool to measure a company's ability to meet its debt obligations. In 2009 there is a increase from 3.77 times to 4.20 times. It shows that the company has generating enough cash from its operations EBIT to meet its interest obligations. 
20082009Debt Ratio:Debt Ratio=Total DebtTotal Assets×100Debt Ratio=$38,9341$1,772,655 ×100Debt Ratio:Debt Ratio=Total DebtTotal Assets×100 Debt Ratio=$51,9040$1,762,018 ×100Debt Ratio=21.96%Debt Ratio=29.45%
Interpretation: This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The debt ratio in 2009 seems to increasing as compare to previous year show that company increase their debt. It is the weakness of company.. 
20082009Debt to Equity Ratio:Debt to Equity Ratio=Long Term DebtTotal EquityDebt to Equity Ratio=$389,181 $486,946 Debt to Equity Ratio:Debt to Equity Ratio=Long Term DebtTotal Equity Debt to Equity Ratio=$389,240 $517,030Debt Ratio=0.79%Debt Ratio=0.75%
Interpretation: There is a bit fall fall in debt to equity ratio as compare to previous year. It is the strength of company. Activity Ratio: 
20082009Average Age of Inventory:Average Age of Inventory=No.of Days In YearInventory TurnoverInventory Turn Over Ratio=Cost of Goods SoldAverage InventoryAverage Inventory=$117,318 +$231,479 2Average Inventory=$174398.5Inventory Turn Over Ratio=$1,962,870 $174398.5Inventory Turn Over Ratio=11.22Average Age of Inventory=36511.22Average Age of Inventory:Average Age of Inventory=No.of Days In YearInventory Turnover Inventory Turn Over Ratio=Cost of Goods SoldAverage InventoryAverage Inventory=$117,318 +$231,4792Average Inventory=$174398.5Inventory Turn Over Ratio=$427,818 $174398.5Inventory Turn Over Ratio=2.45Average Age of Inventory=3652.45Average Age of Inventory=32.53daysAverage Age of Inventory=148 days
Interpretation: Average age of inventory is the average number of days it takes for a company to sell a product. In 2009 average age of inventory increasing . It shows that firm is not properly managing its inventory and it also the strength of company. 
20082009Average Collection Period:Average Collection Period=No.of days in yearA/R turnover ratioA/R Turnover ratio=Net SaleAccounts ReceivableAccount Receivable turnover ratio=$2,208,973 $198,959 Account Receivable turnover ratio=11Average Collection Period=36511Average Collection Period:Average Collection Period=No.of days in yearA/R turnover ratio A/R Turnover ratio=Net SaleAccounts ReceivableAR turnover ratio=$,895,198 $150,046 Account Receivable turnover ratio=6Average Collection Period=3656Average Collection Period=33.18 DaysAverage Collection Period=60 days
Interpretation: The average collection period ratio represents the average number of days for which a firm has to wait before its receivables are converted into cash. Average collection period is very bad because previously we receive collection in 33.18 days and in current year we are receiving collection in 60 days. It is also the weakness of company and it also show the management of company is not good. 
20082009Average Payment Period:Average Payment Period=No.of days in yearA/P turnover ratioA/P Turnover ratio=Net SaleAccounts PayableAccount Payable turnover ratio=$2,208,973 $454,775 Account Payable turnover ratio=4.85Average Collection Period=3654.85Average Payment Period:Average Payment Period=No.of days in yearA/P turnover ratio A/P Turnover ratio=Net SaleAccounts PayableAccount Payable turnover ratio=$1,895,198 $141,168 Account Payable turnover ratio=13.42Average Collection Period=36513.42Average Payment Period=75.25 DaysAverage Payment Period=27.19 Days
Interpretation: Average payment period ratio represents the average number of days taken by the firm to pay its creditors. Average payment period is very bad because previously we are paying collection in 75.25 days but in current year we are paying collection in 27.19 days . nokia View: Annual Data | Quarterly DataAll numbers in thousandsPeriod EndingDec 31, 2009Dec 31, 2008Dec 31, 2007Total Revenue 58,802,000 71,485,887 75,203,328 Cost of Revenue39,772,000 46,995,169 49,716,267 Gross Profit 19,031,000 24,490,718 25,487,062 Operating ExpensesResearch Development8,478,000 8,413,090 8,317,466 Selling General and Administrative7,533,000 9,077,058 5,408,489 Non Recurring1,303,000 - - Others- - - Total Operating Expenses- - - Operating Income or Loss 1,717,000 7,000,570 11,761,107 Income from Continuing OperationsTotal Other Income/Expenses Net(337,000)266,433 480,165 Earnings Before Interest And Taxes1,380,000 7,267,004 12,241,272 Interest Expense- 260,795 63,335 Income Before Tax1,380,000 7,006,209 12,177,937 Income Tax Expense1,007,000 1,523,886 2,241,754 Minority Interest- 139,560 676,061 Net Income From Continuing Ops373,000 5,621,884 10,612,245 Non-recurring EventsDiscontinued Operations- - - Extraordinary Items- - - Effect Of Accounting Changes- - - Other Items- - - Net Income 373,000 5,621,884 10,612,245 Preferred Stock And Other Adjustments- - - Net Income Applicable To Common Shares $373,000 $5,621,884 $10,612,245 View: Annual Data | Quarterly DataAll numbers in thousandsPeriod EndingDec 31, 2009Dec 31, 2008Dec 31, 2007AssetsCurrent AssetsCash And Cash Equivalents1,639,000 2,404,948 3,129,913 Short Term Investments11,092,000 7,209,206 14,181,081 Net Receivables11,471,000 13,455,587 16,726,252 Inventory2,676,000 3,570,770 4,236,060 Other Current Assets7,002,000 7,854,848 4,873,826 Total Current Assets 33,879,000 34,495,359 43,147,133 Long Term Investments960,000 895,160 995,680 Property Plant and Equipment2,679,000 2,946,273 2,816,185 Goodwill7,419,000 8,820,493 2,038,494 Intangible Assets3,963,000 5,860,123 4,029,854 Accumulated Amortization- - - Other Assets214,000 14,097 64,808 Deferred Long Term Asset Charges2,162,000 2,767,241 2,287,414 Total Assets 51,276,000 55,798,745 55,379,567 LiabilitiesCurrent LiabilitiesAccounts Payable16,434,000 17,266,006 20,897,505 Short/Current Long Term Debt1,106,000 5,062,233 1,577,476 Other Current Liabilities4,251,000 6,366,205 5,474,769 Total Current Liabilities 21,791,000 28,694,444 27,949,750 Long Term Debt- - - Other Liabilities6,454,000 1,311,021 474,274 Deferred Long Term Liability Charges1,869,000 2,519,134 1,418,403 Minority Interest2,383,000 3,245,129 3,777,989 Negative Goodwill- - - Total Liabilities 30,114,000 35,769,728 33,620,415 Stockholders' EquityMisc Stocks Options Warrants- - - Redeemable Preferred Stock- - - Preferred Stock- - - Common Stock353,000 346,786 362,333 Retained Earnings14,537,000 16,482,212 20,429,123 Treasury Stock(977,000)(2,651,646)(4,633,743)Capital Surplus400,000 623,087 948,548 Other Stockholder Equity4,465,000 5,228,577 4,652,891 Total Stockholder Equity 18,778,000 20,029,018 21,759,152 Net Tangible Assets $7,396,000 $5,348,402 $15,690,804 Ratio Analysis Liquidity Ratio: 
20082009Current Ratio:Current Ratio=CurrentAssetsCurrent Liability Current Ratio=$34,495,359 $28,694,444 Current Ratio:Current Ratio=CurrentAssetsCurrent Liability Current Ratio=$33,879,000 $21,791,000 Current Ratio=1.20%Current Ratio=1.55%
Interpretation: Current ratio measures whether or not a company has enough resources to pay its debt over the next business cycle. In 2009 current ratio is comparatively above than the previous year. In 2009 current assets exceed Current liabilities. This shows that the company is capable to pay its obligations. 
20082009Quick Ratio:Quick Ratio=CurrentAssets-InventoryCurrent Liability Quick Ratio=$34,495,359-$3,570,770 $28,694,444Quick Ratio:Quick Ratio=CurrentAssets-InventoryCurrent Liability Quick Ratio=$33,879,000 -$2,676,000 $21,791,000Quick Ratio=1.07%Quick Ratio=1.43%
Interpretation: Quick Ratio is also known as the " acid test" ratio; it is a refinement of the current ratio and is a more conservative measure of liquidity. The ratio expresses the degree to which a company's current liabilities are covered by the most liquid current assets. There is a slightly increase in the quick ratio as compare to previous year. This indicates that the company relies too much on inventory or other assets to pay its short-term liabilities. Profitability Ratio: 
20082009Gross Profit Margin:Gross Profit Margin=Gross ProfitNet Sale×100Gross Profit Margin=$24,490,718 $71,485,887×100Gross Profit Margin:Gross Profit Margin=Gross ProfitNet Sale×100 Gross Profit Margin=$19,031,000 $58,802,000 ×100Gross Profit Margin=34.25%Gross Profit Margin=32.36%
Interpretation: Gross profit margin measures company's manufacturing and distribution efficiency during the production process. Gross profit decrease in 2009 as compare to 2008. Which is not better than previous year. 
20082009Operating Profit Margin:Operating Profit Margin=Operating ProfitNet Sale×100Operating Profit Margin=$7,000,570 $71,485,887 ×100Operating Profit Margin:Operating Profit Margin=Operating ProfitNet Sale×100 Operating Profit Margin=$1,717,000 $58,802,000×100Operating Profit Margin=9.79%Operating Profit Margin=2.91%
Interpretation: Operating profit margin is used to measure company's pricing strategy and operating efficiency. In operating profit margin there is a great change as compare to previous year. Operating profit decreases. It shows that the company is earning less as compare to previous years.. 
20082009Net Profit Margin:Net Profit Margin=Net Profit After TaxNet Sale×100 Net Profit Margin=$5,621,884 $71,485,887×100Net Profit Margin:Net Profit Margin=Net Profit After TaxNet Sale×100 Net Profit Margin=$373,000 $58,802,000×100Net Profit Margin=7.86%Net Profit Margin=0.63%
Interpretation: Net profit margin measures how much of each dollar earned by the company is translated into profits. Net profit margin provides clues to the company's pricing policies, cost structure and production efficiency. There is huge decrease in the net profit margin than previous year. It shows that company in bad condition.. 
20082009Return on Total Assets:Return on Total Assets=Net Profit After TaxTotal Assets×100Return on Total Assets=$5,621,884 $55,798,745 ×100Return on Total Assets:Return on Total Assets=Net Profit After TaxTotal Assets×100 Return on Total Assets=$373,000 $51,276,000 ×100Return on Total Assets=10.07%Return on Total Assets=0.72%
Interpretation: Return on Assets shows how many dollars of earnings result from each dollar of assets the company controls. Return on total assets decrease from 10.07% to 0.72% and this is big change which indicate that company is not doing well. 
20082009Return on Total Equity:Return on Total Equity=Net Profit After TaxTotal Equity×100Return on Total Equity=$5,621,884 $20,029,018 ×100Return on Total Equity:Return on Total Equity=Net Profit After TaxTotal Equity×100 Return on Total Equity=$373,000 $18,778,000×100Return on Total Equity=28.06%Return on Total Equity=1.98%
Interpretation: Return on Equity is also referred as Stockholder's return on investment, it tells the rate that shareholders are earning on their shares. Nokia is earning 1.98% on shareholder's equity as compare to the previous year. It indicates the weakness of company. Debt Ratio: 
20082009Time Interest Earned Ratio:Time Interest Earned Ratio=EBITInterestTime Interest Earned Ratio=$7,267,004 $400355Time Interest Earned Ratio:Time Interest Earned Ratio=EBITInterest Time Interest Earned Ratio=1,380,000 0Time Interest Earned Ratio=18.15 TimesNOTE.Not interest avilable in 2009
Interpretation: Time interest earned ratio also known as interest coverage ratio. Times Interest Earned is a great tool to measure a company's ability to meet its debt obligations. In 2009 there is increase from 0.30 to 3.24%. It shows that the company is able to meet its interest obligations because earnings are significantly greater than annual interest obligations. 
20082009Debt Ratio:Debt Ratio=Total DebtTotal Assets×100Debt Ratio=$5,062,233 $55,798,745 ×100Debt Ratio:Debt Ratio=Total DebtTotal Assets×100 Debt Ratio=$1,106,00051,276,000 ×100Debt Ratio=9.07%Debt Ratio=2.15%
Interpretation: This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The debt ratio in 2009 seems to be slightly decreased as compare to previous year and tis is not good sign for Nokia company.This ratio indicates that company increases their debt. 
20082009Debt to Equity Ratio:Debt to Equity Ratio=Long Term DebtTotal EquityDebt to Equity Ratio=5,062,233 $20,029,018 Debt to Equity Ratio:Debt to Equity Ratio=Long Term DebtTotal Equity Debt to Equity Ratio=1,106,000 $18,778,000Debt Ratio=0.25%Debt Ratio=0.05%
Interpretation: Debt to equity ratio seems to be decrease as compare to previous years.. this indicates that company has no financed its growth mostly via debt. Activity Ratio: 
20082009Average Age of Inventory:Average Age of Inventory=No.of Days In YearInventory TurnoverInventory Turn Over Ratio=Cost of Goods SoldAverage InventoryAverage Inventory=$2,676,000 Inventory Turn Over Ratio=$71,485,887 $2,676,000Inventory Turn Over Ratio=26.71Average Age of Inventory=36526.71Average Age of Inventory:Average Age of Inventory=No.of Days In YearInventory Turnover Inventory Turn Over Ratio=Cost of Goods SoldAverage InventoryAverage Inventory=$2,676,000Inventory Turn Over Ratio=$58,802,000 $2,676,000Inventory Turn Over Ratio=21Average Age of Inventory=36521Average Age of Inventory=13.66 daysAverage Age of Inventory=17.3 days
Interpretation: Average age of inventory is the average number of days it takes for a company to sell a product. In 2009 average age of inventory increase.. It shows that firm is not properly managing its inventory and it also the strength of company. 
20082009Average Collection Period:Average Collection Period=No.of days in yearA/R turnover ratioA/R Turnover ratio=Net SaleAccounts ReceivableAR turnover ratio=$71,485,887 $13,455,587 Account Receivable turnover ratio=5.31Average Collection Period=3655.31Average Collection Period:Average Collection Period=No.of days in yearA/R turnover ratio A/R Turnover ratio=Net SaleAccounts ReceivableAR turnover ratio=$58,802,000 $11,471,000 Account Receivable turnover ratio=5.13Average Collection Period=3655.13Average Collection Period=68.73 DaysAverage Collection Period=71.15 Days
Interpretation: The average collection period ratio represents the average number of days for which a firm has to wait before its receivables are converted into cash. Average collection period is no good because previously we receive collection in 68.73 days and in current year we are receiving collection in 71.15 days. It is also the weakness of company. 
20082009Average Payment Period:Average Payment Period=No.of days in yearA/P turnover ratioA/P Turnover ratio=Net SaleAccounts PayableAccount Payable turnover ratio=$71,485,887 $17,266,006 Account Payable turnover ratio=4.14Average Collection Period=3654.14Average Payment Period:Average Payment Period=No.of days in yearA/P turnover ratio A/P Turnover ratio=Net SaleAccounts PayableAccount Payable turnover ratio=$58,802,000 $16,434,000Account Payable turnover ratio=3.57Average Collection Period=3653.57Average Payment Period=88.14 DaysAverage Collection Period=102.24 Days
Interpretation: Average payment period ratio represents the average number of days taken by the firm to pay its creditors. Average payment period is very good because previously we are paying collection in 88.14days but in current year we are paying collection in 102.24 days. It shows that management of company is quite good. Conclusion I have calculated the ratio of LG and Nokia from this i understands the strength and weakness of both company. The main purpose of this project is to how to invest in a company. Which factors is important for investor while investing in any company. A financial Ratio analysis also tells us that which companies it better or profitable. I take the decision of investment on following ratios such as net profit, return on total assets, return on total equity and debt ratio. The comparison of net profit of both company shows that LG has greater profit than Nokia. Return on total asset is also better of LG as compare to Nokia. Return on total equity of is not good for 2009.. It is clear that LG pay more dividends to stockholders of a company.

RATIO ANALYSIS OF NOKIA

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