4. 10 Years Ratio Analysis
1. Net Profit Margin
2. Return on Equity (ROE)
3. Return on Assets (ROA)
4. Asset Turnover
5. Leverage Ratio
6. Receivables Turnover
7. Inventory Turnover
8. Debt to Equity
9. Current Ratio
10. Quick Ratio
5. 1. Net Profit Margin
Net Profit Margin ratio shows what percentage of sales are left over after all
expenses are paid by the business.
Interpretation:
In 2013 the net profit margin ratio was 6% which is lower than 2010, 2011 and
2012 where the ratios were 42%, 8% and 8% and this as not better performance
of the firm.
Recommendation: Company should increase their EBIT to keep increasing net profit.
6. 2. Return on Equity (ROE)
Return on Equity Ratio measures the return on common equity or the rate of
return on stockholders’ investment.
Interpretation: In 2004 the return on common equity of SBL was 42% which is higher
than 2013 where the ratio was 15%. The best position of the ratio was in 2010
where the ratio was 63% and in 2006 and 2009 ratio were 35% and 37%.
Recommendation: Company should increase its Net Income against of Stockholders
equity to improve the situation of this company.
7. 3. Return on Assets (ROA)
Return on asset, often called the return on investment. It measures the overall
effectiveness of management in generating profits with its available assets.
Interpretation: In 2004 the ratio was 12% which was higher than 2011, 2012 and
2013 where the ratios were 11%, 11% and 9% and these indicates the poor
position than 2004. Only 2009 and 2010 are better position in the firm where
ratio was 18% and 48%.
Recommendation: The position of the firm is very bad according to this ratio so it
should need to increase its Net income as soon as possible to improve or increase
the company situation.
8. 4. Asset Turnover
Asset turnover ratio is an efficiency ratio that measures a company's ability to
generate sales from its assets by comparing net sales with total assets.
Interpretation: As you can see SBL’s ratio is only ups and down within 1.99 to 1.14.
This means that for every taka in assets, SBL generates almost 2 taka . In other
words, SBL’s start up is very efficient with its use of assets.
Recommendation: The position of asset turnover in the firm is in good position
according to this ratio. so it should need to increase its sell more for improving
the company situation.
9. 5. Leverage Ratio
Leverage ratio is used to evaluate a company’s debt levels.
Interpretation: The leverage ratio was going to a better position 2004 to 2007 where
leverage ratio was 3.53 to 6.15. After 2007 the ratios becoming fall. In 2013, the
ratio situation is 1.61.
Recommendation: In the situation, the company should to increase Total asset of
decrease Stockholder’s equity.
10. 6. Receivables Turnover
Accounts receivable turnover measures the efficiency of a business in
collecting its credit sales.
Interpretation:
In 2004 the turnover ratio of the SBL was 7.66% which is higher than 2013, where
the ratio was 6.79. But this is higher than 2012. 2009 and 2010 was better turnover
position where the ratios were 9.40% and 8.65%.
Recommendation
Company must increase the ratio by decreasing total receivables or increasing total
sales for achieving better position.
11. 7. Inventory Turnover
Inventory turnover ratio is used to measure the inventory management
efficiency of a business.
Interpretation: In 2004 the inventory turnover ratio of the SBL was 2.54 which is
very close to one another. And only 2009 and 2013 show high inventory turnover
where 4.44 and 3.84 that was is comparatively higher that previous years.
Recommendation: for increasing the turnover ratio, either the company should to
decrease their inventory level or making less cost of goods sold.
12. 8. Debt to Equity
Debt-to-Equity ratio is the ratio of total liabilities of a business to its
shareholders' equity.
Interpretation:
The present situation of the company is very good. Because 2010 to 2013 their Debt
ratio below 1 and 2004 to 2009 was so high. The company year to year reduce the
ratio.
Recommendation: Need not any serious step to resolve it. It is good scenario. But
should try to reduce more than .60901870
13. 9. Current Ratio
Cash ratio is the ratio of cash and cash equivalents of a company to its current
liabilities.
Interpretation:
In 2004 the CR of SBL was tell which was lower than 2013 where the ratio 1.66 and
which is worst position compare to 2013. In 2013 the ratio is 4.50 that were
considered as good performance.
Recommendation:
We can find that the company has done well over the year and to more improve the
situation it should graphically enlarge CR by increasing CA or decreasing CL.
14. 10. Quick Ratio
Quick ratio is the ratio of the sum of cash and cash equivalents, marketable
securities and accounts receivable to the current liabilities of a business.
Interpretation:
In 2004 the liquidity ratio of the SBL was .48 which is lower than 2013 where the ratio was 1.49 .
But this is lower then 2010 and 2011. where the ratios were 3.53 and 1.80.
Recommendation
Company must increase the ratio by decreasing total liabilities or increasing total asset for the
better position.
