This document provides a financial ratio analysis of Abbott Laboratories for the years 2011-2013. It includes calculations and interpretations of key liquidity ratios (current ratio and quick ratio), profitability ratios (gross profit ratio, net profit ratio, operating profit ratio), and inventory turnover ratio. The ratios are also compared to industry averages. Overall, the analysis finds that Abbott's liquidity and profitability ratios were generally satisfactory and in line with industry averages, though some saw declines from 2012 to 2013.
Financial Ratio Analysis of Abbott Laboratories (JINCEY JOSE & SHRADDHA BHATT)JinceyJose
The document provides a financial ratio analysis of Abbott Laboratories for the years 2011-2013. It includes a balance sheet, calculation of key financial ratios like current ratio, quick ratio, gross profit ratio, net profit ratio, and operating profit ratio. The ratios are also compared to industry averages. Overall, the ratios indicate Abbott Laboratories' liquidity and profitability were generally satisfactory and improved from 2011-2012 but declined in 2013.
The document provides an analysis of the Indian pharmaceutical market and the performance of Novartis and IPCA, two pharmaceutical companies operating in India. It summarizes that the Indian pharmaceutical market is growing at 15.4% annually and is poised to reach $25 billion by 2010. However, factors like low public healthcare spending and currency appreciation are challenges. The analysis finds that Novartis has stronger leverage, profitability, liquidity and asset utilization compared to IPCA, making Novartis a more attractive investment option for shareholders.
Sun Pharmaceutical Industries is an Indian pharmaceutical company headquartered in Mumbai. It manufactures generic and branded formulations as well as active pharmaceutical ingredients. The company offers a range of products across several therapeutic areas. It became the fifth largest generic company in the world after acquiring Ranbaxy Laboratories in 2014. An analysis of Sun Pharma's financial ratios from 2011-2015 showed that the company generally maintained healthy profitability and liquidity ratios during this period, though some ratios like interest coverage declined over time, potentially due to increased borrowing.
The document analyzes various financial ratios of BEXIMCO Pharmaceuticals Ltd. based on their annual reports from 2012-2013. Some key ratios that declined from 2012 to 2013 included current ratio, quick ratio, cash ratio, cash flow from operations ratio, gross margin, operating margin, pre-tax margin, and profit margin. However, inventory turnover, receivables turnover, payables turnover, and some measures of return on equity increased from 2012 to 2013. Overall, the ratio analysis found that the company's liquidity, profitability, and efficiency declined slightly from 2012 to 2013, though some measures of long-term performance improved.
Long-term Corporate Finance Project on GlaxoSmithKline Inc.nroopraj24
The document is a report analyzing the financial performance and capital structure of GlaxoSmithKline (GSK). It includes an executive summary, sections on financial analysis using key ratios, company information, market analysis, an in-depth analysis of GSK's share buyback program, and conclusions. The financial analysis shows GSK has strong liquidity, high profitability, and uses debt aggressively but is able to service it based on interest coverage ratios. The market analysis compares GSK's stock performance to benchmarks and finds it moves closely with the market.
This Project deals with the comparative study of 2 companies listed in S&P 500 for their performance evaluation & ratio analysis for the 3 financial years.
This document analyzes the financial position of a pharmaceutical sector company over 2008-2009. It provides common size income statements and balance sheets, cash flow statements, financial ratios comparing the company to competitors, a SWOT analysis, and recommendations for the company and investors. Key findings include higher expenses and less efficient asset use as weaknesses, and opportunities for market and liquidity growth. Recommendations focus on cost control, improving asset turnover, and potential investment from the company's global parent.
Financial Ratio Analysis of Abbott Laboratories (JINCEY JOSE & SHRADDHA BHATT)JinceyJose
The document provides a financial ratio analysis of Abbott Laboratories for the years 2011-2013. It includes a balance sheet, calculation of key financial ratios like current ratio, quick ratio, gross profit ratio, net profit ratio, and operating profit ratio. The ratios are also compared to industry averages. Overall, the ratios indicate Abbott Laboratories' liquidity and profitability were generally satisfactory and improved from 2011-2012 but declined in 2013.
The document provides an analysis of the Indian pharmaceutical market and the performance of Novartis and IPCA, two pharmaceutical companies operating in India. It summarizes that the Indian pharmaceutical market is growing at 15.4% annually and is poised to reach $25 billion by 2010. However, factors like low public healthcare spending and currency appreciation are challenges. The analysis finds that Novartis has stronger leverage, profitability, liquidity and asset utilization compared to IPCA, making Novartis a more attractive investment option for shareholders.
Sun Pharmaceutical Industries is an Indian pharmaceutical company headquartered in Mumbai. It manufactures generic and branded formulations as well as active pharmaceutical ingredients. The company offers a range of products across several therapeutic areas. It became the fifth largest generic company in the world after acquiring Ranbaxy Laboratories in 2014. An analysis of Sun Pharma's financial ratios from 2011-2015 showed that the company generally maintained healthy profitability and liquidity ratios during this period, though some ratios like interest coverage declined over time, potentially due to increased borrowing.
The document analyzes various financial ratios of BEXIMCO Pharmaceuticals Ltd. based on their annual reports from 2012-2013. Some key ratios that declined from 2012 to 2013 included current ratio, quick ratio, cash ratio, cash flow from operations ratio, gross margin, operating margin, pre-tax margin, and profit margin. However, inventory turnover, receivables turnover, payables turnover, and some measures of return on equity increased from 2012 to 2013. Overall, the ratio analysis found that the company's liquidity, profitability, and efficiency declined slightly from 2012 to 2013, though some measures of long-term performance improved.
Long-term Corporate Finance Project on GlaxoSmithKline Inc.nroopraj24
The document is a report analyzing the financial performance and capital structure of GlaxoSmithKline (GSK). It includes an executive summary, sections on financial analysis using key ratios, company information, market analysis, an in-depth analysis of GSK's share buyback program, and conclusions. The financial analysis shows GSK has strong liquidity, high profitability, and uses debt aggressively but is able to service it based on interest coverage ratios. The market analysis compares GSK's stock performance to benchmarks and finds it moves closely with the market.
This Project deals with the comparative study of 2 companies listed in S&P 500 for their performance evaluation & ratio analysis for the 3 financial years.
This document analyzes the financial position of a pharmaceutical sector company over 2008-2009. It provides common size income statements and balance sheets, cash flow statements, financial ratios comparing the company to competitors, a SWOT analysis, and recommendations for the company and investors. Key findings include higher expenses and less efficient asset use as weaknesses, and opportunities for market and liquidity growth. Recommendations focus on cost control, improving asset turnover, and potential investment from the company's global parent.
The document analyzes various financial ratios for Engro Foods Limited for the years 2008, 2009, and 2010 to evaluate the company's liquidity, asset usage, profitability, and financial position. It calculates 13 key ratios including current ratio, quick ratio, return on assets, return on equity, and profit margin. The ratios provide insights into Engro Foods' ability to meet short-term obligations, efficiency in using assets, and effectiveness in generating profits.
The document discusses financial ratio analysis for companies in the FMCG (Fast Moving Consumer Goods) sector in India. It provides definitions of common financial ratios used to analyze companies, including liquidity, leverage, and profitability ratios. Tables then show the financial ratio values for major FMCG companies like ITC, HUL, Dabur, and Nestle over several years from 2008 to 2007. Key highlights noted are that FMCG companies have shown stable profit margins over the years, low debt-to-equity ratios, current ratios below 1 for most companies except ITC, and high dividend payout and equity dividend ratios.
Financial Ratio Analysis of Samsung for the year 2013-2014Prinson Rodrigues
Financial Ratio Analysis of Samsung For the year 2013-2014
Current ratio
Quick ratio
Debt equity ratio
Capital turnover ratio
Fixed Assets Turnover ratio
Working capital turnover ratio
Stock turnover ratio
inventory conversion period
Debtors turnover ratio
Gross profit ratio
net profit ratio
etc
in this presentation we discussed about basic of ratio, types of ratio, comparison of ratios of hul and itc limited.
some ratios and graphs are taken from moneycontrol.com
The document analyzes and compares the financial ratios of Nestle and Unilever for 2010 and 2009. Some key highlights:
- Nestle had stronger liquidity ratios, with higher current, quick, and cash ratios compared to Unilever.
- Unilever saw decreases in total debt and long-term debt ratios from 2009 to 2010, while ratios were generally higher than Nestle.
- Inventory and receivables turnover ratios improved for both companies from 2009 to 2010, though Nestle ratios were weaker.
- Asset and profitability ratios like ROA, ROE, and profit margin were higher for Unilever in 2010 compared to 2009 and Nestle.
So in summary
The document discusses various financial ratios for Jamuna Oil Company for 2011-12 and 2010-11 fiscal years. The current ratio, quick ratio, inventory turnover, average collection period, average payment period, total asset turnover, debt ratio, gross profit margin, operating profit margin, net profit margin, earnings per share and return on total assets are presented with their calculations and comparisons between the two years. The ratios indicate the company's liquidity, efficiency, profitability and ability to pay debts over different time periods.
Financial Statement Analysis and Valuation OfApex Foods LtdMonir Hossain
This document provides an analysis of Apex Foods Ltd., a shrimp food producer in Bangladesh. It includes information on the company's capital structure, products, dividend policy, industry analysis using Porter's five forces, ratio analysis compared to benchmarks and peers, relative valuation, DuPont analysis, leverage analysis, potential red flags, earnings quality evaluation, cash flow statement analysis, actual and sustainable growth rates, and estimation of economic value added. In summary, it performs a comprehensive financial analysis of Apex Foods Ltd. to evaluate its performance and value.
Ratio analysis is a useful management tool that allows managers to analyze financial results and trends over time to identify organizational strengths and weaknesses. It involves calculating and comparing various types of ratios related to profitability, liquidity, asset usage, debt, and investor returns. Higher ratios may indicate better performance, with targets varying by industry. The document then provides examples of specific profitability, liquidity, turnover, valuation, and leverage ratios, calculating them for Hindustan Unilever for 2014 and 2015 to analyze the company's financial performance.
Financial analysis of aanjaneya life care ltdSwapnil Chavan
Aanjaneya Life Science is a research-driven pharmaceutical company based in India that manufactures finished dosage forms and active pharmaceutical ingredients. The document provides an overview of the company profile and financial analysis, including balance sheets, profit/loss statements, and ratio analysis for 2012-2013. The ratio analysis shows that while the company's liquidity, debt repayment capacity, and profitability increased from 2012 to 2013, asset utilization and operating efficiency declined over this period.
This financial analysis report summarizes Gree Electric Appliances' financial performance from 2009-2013. It analyzes Gree's short-term liquidity, financial leverage, operational capacity, profitability, and development capacity compared to its peers. While Gree maintains high debt ratios, its strong relationships with suppliers and non-interest bearing debts allow it to effectively control financial risk. The report also uses DuPont analysis to evaluate Gree's profitability, asset utilization, and financial structure.
The document analyzes various financial ratios for Scientex Berhad for 2012 and 2011. It finds that the company's liquidity ratios decreased slightly from 2011 to 2012, indicating weaker short-term financial health. Efficiency ratios also decreased slightly, suggesting the company was turning over inventory and collecting debts slightly slower. Debt ratios increased marginally from 2011 to 2012, demonstrating a small increase in leverage. Profitability ratios remained mostly stable, with operating and net profit margins rising slightly from 2011 to 2012. In conclusion, the company's financial performance was stable but showed some minor weaknesses in liquidity and efficiency from 2011 to 2012.
All financial ratios of bata shoe of last five years Faiz Subhani
financial analysis of firm's financial statements & horizontal and vertical analysis is also given in this
also explained the purpose of finding each ratio for a firm and how can we compare with its past years and with other organizations and with industry standards
The document analyzes the financial performance of Voltas over several years. It examines the company's liquidity, turnover, profitability, and overall performance. Key points:
- The company's current and quick ratios show adequate liquidity to meet short-term obligations. Inventories and receivables decreased from prior years.
- Inventory turnover and debtors' turnover ratios remained relatively stable from 2013-2014. Creditors' turnover saw a small increase.
- Gross and net profit margins declined from 2010-2014 despite expenses decreasing from 2013-2014. Dividends per share and earnings per share increased.
- Overall, the company's performance has been positive based on stable profitability, increased shareholders' returns
This document provides an overview and analysis of financial statements and financial ratios. It begins with definitions and comparisons of key financial statements (balance sheet, income statement, cash flow statement) and accounting standards (HGB, IFRS, US-GAAP). Next, it describes types of financial ratios and their categories. Finally, it provides two case studies analyzing automaker ratios from 2015 and Volkswagen Group ratios from 2006-2016 to evaluate performance over time and relative to competitors/industry averages.
WORKING CAPITAL MANAGEMENT PROCEDURE(A Study on ACI Ltd.)Romana Aktar Anyka
A company cannot be fully evaluated only by over viewing the cash, accounts receivables, inventory, short-term security and short-term liabilities management procedures. Other types of financial performance indicators such as profitability ratios, debt ratios, activity ratios and market ratios etc should also be considered when assessing and appraising the performance of a company – and this is also true for ACI Ltd.
Comparisons should also be made:
between companies
between industries
between different time periods for one company
between a single company and its industry average
This particular project is based on ratio analysis of Coca-Cola International. I have analyzed two years financial performance of Coke i.e. from 2011 to 2012. I hope my this effort will help other interested students.
The document analyzes various financial ratios of Bata shoe company over three years from 2011-2013. It examines liquidity, efficiency, leverage, and profitability ratios. The liquidity ratios like current and quick ratios fluctuate over the years but are below ideal levels. Efficiency ratios like inventory and receivable turnover improve but are still not high. Leverage ratios like debt remain around 50% which is reasonable. Profitability ratios trend upward from 2011-2013 with margins and returns on assets and equity increasing in the later years.
This document discusses financial ratio analysis and provides examples of calculating various ratios for a company called Davies Inc. and comparing them to peer group averages. It defines different types of ratios including liquidity, asset management, profitability, leverage, and market value ratios. Formulas for calculating each ratio are given. An example shows Davies Inc.'s ratios calculated from financial data provided and compared to the peer group averages. Additional questions with examples of calculating total assets turnover and debt ratio are also included.
1. The document analyzes an investment in Dabur India Pvt. Ltd for three investors with different investment horizons of 1 year, 3 years, and 7 years.
2. Technical analysis and relative valuation are recommended for the 1 year investment, DCF and relative valuation for 3 years, and DCF for 7 years.
3. A fundamental analysis of Dabur finds the company has good profitability, liquidity, and cash flow ratios compared to industry averages. The analysis recommends Dabur as an investment.
- The document is a project report analyzing the financial statements of National Thermal Power Corporation (NTPC).
- It outlines the objectives of the study, which were to gain an understanding of NTPC's organization, finance department, return on investment policy, financial performance, and the importance of finance in business.
- The report also discusses NTPC's board of directors, independent directors, vision, mission, core values, and the research methodology used in the project.
The document analyzes various financial ratios for Engro Foods Limited for the years 2008, 2009, and 2010 to evaluate the company's liquidity, asset usage, profitability, and financial position. It calculates 13 key ratios including current ratio, quick ratio, return on assets, return on equity, and profit margin. The ratios provide insights into Engro Foods' ability to meet short-term obligations, efficiency in using assets, and effectiveness in generating profits.
The document discusses financial ratio analysis for companies in the FMCG (Fast Moving Consumer Goods) sector in India. It provides definitions of common financial ratios used to analyze companies, including liquidity, leverage, and profitability ratios. Tables then show the financial ratio values for major FMCG companies like ITC, HUL, Dabur, and Nestle over several years from 2008 to 2007. Key highlights noted are that FMCG companies have shown stable profit margins over the years, low debt-to-equity ratios, current ratios below 1 for most companies except ITC, and high dividend payout and equity dividend ratios.
Financial Ratio Analysis of Samsung for the year 2013-2014Prinson Rodrigues
Financial Ratio Analysis of Samsung For the year 2013-2014
Current ratio
Quick ratio
Debt equity ratio
Capital turnover ratio
Fixed Assets Turnover ratio
Working capital turnover ratio
Stock turnover ratio
inventory conversion period
Debtors turnover ratio
Gross profit ratio
net profit ratio
etc
in this presentation we discussed about basic of ratio, types of ratio, comparison of ratios of hul and itc limited.
some ratios and graphs are taken from moneycontrol.com
The document analyzes and compares the financial ratios of Nestle and Unilever for 2010 and 2009. Some key highlights:
- Nestle had stronger liquidity ratios, with higher current, quick, and cash ratios compared to Unilever.
- Unilever saw decreases in total debt and long-term debt ratios from 2009 to 2010, while ratios were generally higher than Nestle.
- Inventory and receivables turnover ratios improved for both companies from 2009 to 2010, though Nestle ratios were weaker.
- Asset and profitability ratios like ROA, ROE, and profit margin were higher for Unilever in 2010 compared to 2009 and Nestle.
So in summary
The document discusses various financial ratios for Jamuna Oil Company for 2011-12 and 2010-11 fiscal years. The current ratio, quick ratio, inventory turnover, average collection period, average payment period, total asset turnover, debt ratio, gross profit margin, operating profit margin, net profit margin, earnings per share and return on total assets are presented with their calculations and comparisons between the two years. The ratios indicate the company's liquidity, efficiency, profitability and ability to pay debts over different time periods.
Financial Statement Analysis and Valuation OfApex Foods LtdMonir Hossain
This document provides an analysis of Apex Foods Ltd., a shrimp food producer in Bangladesh. It includes information on the company's capital structure, products, dividend policy, industry analysis using Porter's five forces, ratio analysis compared to benchmarks and peers, relative valuation, DuPont analysis, leverage analysis, potential red flags, earnings quality evaluation, cash flow statement analysis, actual and sustainable growth rates, and estimation of economic value added. In summary, it performs a comprehensive financial analysis of Apex Foods Ltd. to evaluate its performance and value.
Ratio analysis is a useful management tool that allows managers to analyze financial results and trends over time to identify organizational strengths and weaknesses. It involves calculating and comparing various types of ratios related to profitability, liquidity, asset usage, debt, and investor returns. Higher ratios may indicate better performance, with targets varying by industry. The document then provides examples of specific profitability, liquidity, turnover, valuation, and leverage ratios, calculating them for Hindustan Unilever for 2014 and 2015 to analyze the company's financial performance.
Financial analysis of aanjaneya life care ltdSwapnil Chavan
Aanjaneya Life Science is a research-driven pharmaceutical company based in India that manufactures finished dosage forms and active pharmaceutical ingredients. The document provides an overview of the company profile and financial analysis, including balance sheets, profit/loss statements, and ratio analysis for 2012-2013. The ratio analysis shows that while the company's liquidity, debt repayment capacity, and profitability increased from 2012 to 2013, asset utilization and operating efficiency declined over this period.
This financial analysis report summarizes Gree Electric Appliances' financial performance from 2009-2013. It analyzes Gree's short-term liquidity, financial leverage, operational capacity, profitability, and development capacity compared to its peers. While Gree maintains high debt ratios, its strong relationships with suppliers and non-interest bearing debts allow it to effectively control financial risk. The report also uses DuPont analysis to evaluate Gree's profitability, asset utilization, and financial structure.
The document analyzes various financial ratios for Scientex Berhad for 2012 and 2011. It finds that the company's liquidity ratios decreased slightly from 2011 to 2012, indicating weaker short-term financial health. Efficiency ratios also decreased slightly, suggesting the company was turning over inventory and collecting debts slightly slower. Debt ratios increased marginally from 2011 to 2012, demonstrating a small increase in leverage. Profitability ratios remained mostly stable, with operating and net profit margins rising slightly from 2011 to 2012. In conclusion, the company's financial performance was stable but showed some minor weaknesses in liquidity and efficiency from 2011 to 2012.
All financial ratios of bata shoe of last five years Faiz Subhani
financial analysis of firm's financial statements & horizontal and vertical analysis is also given in this
also explained the purpose of finding each ratio for a firm and how can we compare with its past years and with other organizations and with industry standards
The document analyzes the financial performance of Voltas over several years. It examines the company's liquidity, turnover, profitability, and overall performance. Key points:
- The company's current and quick ratios show adequate liquidity to meet short-term obligations. Inventories and receivables decreased from prior years.
- Inventory turnover and debtors' turnover ratios remained relatively stable from 2013-2014. Creditors' turnover saw a small increase.
- Gross and net profit margins declined from 2010-2014 despite expenses decreasing from 2013-2014. Dividends per share and earnings per share increased.
- Overall, the company's performance has been positive based on stable profitability, increased shareholders' returns
This document provides an overview and analysis of financial statements and financial ratios. It begins with definitions and comparisons of key financial statements (balance sheet, income statement, cash flow statement) and accounting standards (HGB, IFRS, US-GAAP). Next, it describes types of financial ratios and their categories. Finally, it provides two case studies analyzing automaker ratios from 2015 and Volkswagen Group ratios from 2006-2016 to evaluate performance over time and relative to competitors/industry averages.
WORKING CAPITAL MANAGEMENT PROCEDURE(A Study on ACI Ltd.)Romana Aktar Anyka
A company cannot be fully evaluated only by over viewing the cash, accounts receivables, inventory, short-term security and short-term liabilities management procedures. Other types of financial performance indicators such as profitability ratios, debt ratios, activity ratios and market ratios etc should also be considered when assessing and appraising the performance of a company – and this is also true for ACI Ltd.
Comparisons should also be made:
between companies
between industries
between different time periods for one company
between a single company and its industry average
This particular project is based on ratio analysis of Coca-Cola International. I have analyzed two years financial performance of Coke i.e. from 2011 to 2012. I hope my this effort will help other interested students.
The document analyzes various financial ratios of Bata shoe company over three years from 2011-2013. It examines liquidity, efficiency, leverage, and profitability ratios. The liquidity ratios like current and quick ratios fluctuate over the years but are below ideal levels. Efficiency ratios like inventory and receivable turnover improve but are still not high. Leverage ratios like debt remain around 50% which is reasonable. Profitability ratios trend upward from 2011-2013 with margins and returns on assets and equity increasing in the later years.
This document discusses financial ratio analysis and provides examples of calculating various ratios for a company called Davies Inc. and comparing them to peer group averages. It defines different types of ratios including liquidity, asset management, profitability, leverage, and market value ratios. Formulas for calculating each ratio are given. An example shows Davies Inc.'s ratios calculated from financial data provided and compared to the peer group averages. Additional questions with examples of calculating total assets turnover and debt ratio are also included.
1. The document analyzes an investment in Dabur India Pvt. Ltd for three investors with different investment horizons of 1 year, 3 years, and 7 years.
2. Technical analysis and relative valuation are recommended for the 1 year investment, DCF and relative valuation for 3 years, and DCF for 7 years.
3. A fundamental analysis of Dabur finds the company has good profitability, liquidity, and cash flow ratios compared to industry averages. The analysis recommends Dabur as an investment.
- The document is a project report analyzing the financial statements of National Thermal Power Corporation (NTPC).
- It outlines the objectives of the study, which were to gain an understanding of NTPC's organization, finance department, return on investment policy, financial performance, and the importance of finance in business.
- The report also discusses NTPC's board of directors, independent directors, vision, mission, core values, and the research methodology used in the project.
This document analyzes the financial statements of Gul Ahmed Textile Mills Ltd from 2010-2013. It includes various liquidity, leverage, activity, and profitability ratios calculated from the company's balance sheets and income statements. The liquidity ratios show the company has a current ratio close to 1 and low quick ratios, indicating insufficient short-term assets to cover debts. Leverage ratios like debt-to-total assets of around 75% suggest high reliance on debt. Activity ratios show inventory turnover improving but average collection periods remaining high. Profitability ratios demonstrate fluctuating net profit margins and returns on assets and equity.
Financial analysis of novartis pharmaceuticalsyashicaj9
Novartis Pharmaceuticals is an international healthcare company headquartered in Switzerland. The document analyzes Novartis' financial performance in India from 2012-2011 through ratio analysis. Key findings include:
1. Liquidity ratios like current and quick ratios show Novartis had a more satisfactory short-term financial position in 2011 compared to 2012.
2. Leverage and proprietary ratios measuring long-term solvency were satisfactory for both years.
3. Turnover ratios for inventory, fixed assets, and working capital were generally higher in 2011, indicating more efficient utilization of company resources that year compared to 2012.
4. Overall, the ratio analysis found Novartis' financial management
This document presents a case study on ratio analysis of Ashok Leyland, an automobile company in India. It includes an introduction to ratio analysis and its classifications. Various liquidity, activity, profitability, and capital structure ratios are calculated, such as gross profit ratio, net profit ratio, and current ratio. The ratios are compared over multiple years. Ratio analysis can be used for forecasting, planning, measuring efficiency, and indicating long-term solvency. While providing historical information, it has some limitations such as not accounting for changes in price levels or different accounting policies across companies. In conclusion, the ratio analysis validated data from Ashok Leyland's financial statements and showed profitability depends on optimal resource utilization.
Financial Report and Ratio Analysis of Square Pharmaceuticals LimitedMD TOWFIQUR RAHMAN
This document analyzes the financial performance of Square Pharmaceuticals Ltd. for 2014-2015 using financial ratios. It provides Square's background and financial statements for the two years. The document then calculates and analyzes key ratios to evaluate Square's liquidity, activity, leverage, profitability, and growth. Specifically, it finds that in 2015 Square had a current ratio of 3.82 times, quick ratio of 2.52 times, inventory turnover of 4.51 times, and fixed asset turnover of 0.78 times. The analysis of ratios provides insight into Square's financial condition and efficiency over time.
This document discusses the use of accounting as a decision making tool for quantity surveyors. It outlines objectives like using financial statement factors and management accounting factors to make decisions. It provides examples of income statements for Company A and B for the year ending 2011. It also discusses ratio analysis, liquidity ratios, activity ratios, financial leverage ratios, profitability ratios, and per share ratios as accounting tools. Budgeting, capital budgeting, cash flow statements, break-even analysis, economic order quantity, and stock ledgers are also covered.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This document discusses various types of financial statement analysis including trend analysis, comparative statements, common size statements, and ratio analysis.
Trend analysis involves comparing financial data such as sales, expenses, profits, etc. over multiple periods to analyze changes over time. Comparative statements compare line items between two periods to analyze absolute and percentage changes. Common size statements express each financial statement line item as a percentage of a total to facilitate comparison. Ratio analysis calculates financial ratios to evaluate performance, liquidity, profitability, and other measures.
This document discusses various types of financial statement analysis including trend analysis, comparative statements, common size statements, and ratio analysis. It provides templates for comparative balance sheets and income statements showing calculations of amount and percentage changes between periods. It also includes templates for common size statements showing items as a percentage of total capital employed or net sales. Financial statement analysis is used to measure profitability, growth, financial strength, and solvency by analyzing relationships and trends over time from financial statements.
ACG 2071 Chapter 13 Analysis of Financial Statements .docxbobbywlane695641
ACG 2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
1
Financial Statement Analysis
• Applies analytical tools to general purpose financial statements and related data for making
business decisions.
• Purpose:
• Internal users: it provides strategic information to improve company efficiency and
effectiveness in proving products and services
• External users: rely on financial statement analysis to make better and more informed
decisions in pursuing their own goals
• Common Goals:
• Evaluate company performance and financial conditions
• Evaluating past and current performance
• Evaluating current financial position
• Evaluating future performance and risk
Building Blocks of Analysis
Horizontal Analysis
• Refers to the examination of financial statements across time
• Comparative statements facilitates this.
• Its shows financial amounts in side-by-side columns on a single statement
• Includes:
• Dollar change = Current period amount – base period amount
• Percent Change = Current period amount – base period amount
• Base period amount
Liquidity and efficiency
Solvency
Profitability
Market prospects
ACG 2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
2
Comparison of two years of operations by computing the dollar change and percentage change in the
line items.
ACG 2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
3
Trend Analysis:
• Form of horizontal analysis that can reveal patterns in data across successive
periods.
• It involves computing trend percents for a series of financial numbers and is a
variation on the use of percent changes
• Trend Percent = Current period amount X 100
• Base period amount
ACG 2071 Managerial Accounting
Process Costing Systems
Minicase
Jeffersonian Corporation has been in business for over 50 years. The company is looking to expand
operations into the Pacific Rim and would like an analysis of its financial statements to be prepared.
Review the financial statements below:
Jeffersonian Corporation
Comparative Income Statement
For years ended December 31, 2011 and 2010
2011 2010
Sales $ 2,486,000.00 $ 2,075,000.00
Cost of goods sold $ 1,523,000.00 $ 1,222,000.00
Gross Profit $ 963,000.00 $ 853,000.00
Operating Expenses
Salaries Expense $ 145,000.00 $ 100,000.00
Contract Labor Expense $ 240,000.00 $ 280,000.00
Insurance Expense $ 165,000.00 $ 200,000.00
Supplies expense $ 100,000.00 $ 45,000.00
.
Income StatementBalance SheetCash Flow Statementmanijutt
The document contains project report submitted by 4 students on the financial statements of Google from 2010-2014. It includes income statements, balance sheets, accounting ratios and their analysis. Key information presented includes:
- Sales/revenue grew from $29.12M to $65.83M from 2010-2014. Net income grew from $6.53M to $22.26M over the same period.
- Total assets grew from $94.04M to $184.3M from 2010-2014 with increasing property, plant and equipment. Shareholder's equity also increased from $70.11M to $139.14M.
- Accounting ratios like current ratio, quick ratio, stock turnover ratio
There are five common frameworks for company valuation:
1. Enterprise discounted cash flow values free cash flows discounted by the weighted average cost of capital.
2. Discounted economic profit values economic profit discounted by the weighted average cost of capital.
3. Adjusted present value highlights changing capital structure more easily than WACC models.
4. Capital cash flow compresses free cash flow and interest tax shield, making performance comparison difficult.
5. Equity cash flow values cash flows to equity discounted by the cost of equity but is difficult to implement correctly.
This document provides an overview of financial statement analysis. It discusses the different types of financial statements, including the income statement, balance sheet, and statement of cash flows. It then presents a framework for analyzing the financial needs and condition of a firm using various financial ratios. The ratios are categorized as liquidity, leverage, coverage, activity, and profitability ratios. The document concludes with explanations of common-size and index analyses for comparing financial statement items over time and across firms.
This document analyzes the security of an investment in Under Armour. It provides financial highlights and ratios for 2013-2016 and projections through 2020. Key points include high debt/equity ratios that pose financial risk, increasing assets but decreasing asset turnover, and recommendations to hold the stock with a price target of $30.63 based on discounted cash flow valuation. Risks discussed are related to finances, markets, and operations.
Financial Ratio analysis Of Gul Ahmed Textile Ltd.PakeezaTehmuri
This document analyzes various financial ratios for Gul Ahmed Textile Mill from 2013-2017. It discusses different types of ratios including activity, liquidity, solvency, profitability, valuation, and DuPont ratios. The DuPont analysis breaks down return on equity into its components: net profit margin, total asset turnover, and financial leverage. It finds Gul Ahmed's fluctuating ROE over this period was influenced by multiple changing factors rather than one aspect alone, such as increasing tax burden, unstable interest costs, and lower use of leverage.
Ratio Analysis in 'ROYAL CERAMIC LANKA PLC'miranga88
This document provides financial ratio analysis for Royal Ceramic Lanka PLC for the years 2013-2015. It includes profitability ratios like gross profit ratio, operating margin, net profit percentage, return on assets, return on equity, and return on capital employed. Liquidity ratios like current ratio, quick ratio, and cash ratio are also presented. The ratios indicate that while the company's sales have increased year-over-year, profitability has declined over this period as costs have risen faster than revenues. Liquidity has also decreased, suggesting the company may face challenges meeting short-term obligations.
Ratio Analysis in 'ROYAL CERAMIC LANKA PLC'miranga88
This document provides financial ratio analysis for Royal Ceramic Lanka PLC for the years 2013-2015. It includes profitability ratios like gross profit ratio, operating margin, net profit percentage, return on assets, return on equity, and return on capital employed. Liquidity ratios like current ratio, quick ratio, and cash ratio are also presented. The ratios indicate that while the company's sales have increased year-over-year, profitability has declined over this period as costs have risen faster than revenues. Liquidity has also decreased, suggesting the company may face challenges meeting short-term obligations.
Ericsson is a leading provider of communications technology and services. It analyzed key financial ratios from its income statement, balance sheet, and cash flow statement from 2012-2010. Profit margins, returns, and earnings per share declined from 2011 to 2012 due to lower profits. Liquidity was stable but inventory turnover improved. Debt levels were unchanged while interest coverage declined on lower profits. Valuation ratios indicated the share price was high relative to earnings. The cash flow statement showed interest and tax payments and cash and investment balances.
3. About ABBOTT laboratories
• Headquartered in Mumbai
• Founded in 1888, by a young Chicago based
physician, Dr.Wallace Calvin Abbott
• 150 countries
• 35 distribution points, over 4,500 stockists and
150,000 retail outlets
• The current market capitalisation stands at
Rs.3,625.98 crore.
• Sales of Rs.471.81 crore and a Net Profit of Rs
53.46 crore for the quarter ended Dec 2013.
4. The Six Pillars of Abbott
• One Team
• Agile
• Results
• Mutual Respect
• Trust
• Shape the market
5. SWOT Analysis
• Increasing
obsolesce of
technology
• Broad-based
medical
innovation
• Dependent upon
mature products
• Available only in
certain countries.
• Collaborating
with Syngene
• Strong employee
force of 90,000
Strength Weakness
Threat
Opportu-
nities
7. Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
ASSETS
Cash And Cash Equivalents 3,475,000,000 10,802,000,000 6,812,820,000
Short Term Investments 4,623,000,000 4,372,000,000 1,284,539,000
Net Receivables 6,514,000,000 10,599,000,000 10,384,460,000
Inventory 2,693,000,000 3,793,000,000 3,284,249,000
Other Current Assets 1,942,000,000 1,757,000,000 2,002,706,000
Total Current Assets 19,247,000,000 31,323,000,000 23,768,774,000
Long Term Investments 119,000,000 274,000,000 378,225,000
Property Plant and Equipment 5,971,000,000 8,063,000,000 7,873,955,000
Goodwill 9,772,000,000 15,774,000,000 15,705,380,000
Intangible Assets 5,735,000,000 8,588,000,000 9,989,636,000
Accumulated Amortization - - -
Other Assets - - -
Deferred Long Term Asset
Charges
2,109,000,000 3,213,000,000 2,560,923,000
ANNUAL BALANCE SHEET ( 2011 , 2012 & 2013)
8. LIABILITIES
Accounts Payable 5,948,000,000 10,889,000,000 12,105,473,000
Short/Current Long
Term Debt
3,173,000,000 2,391,000,000 3,374,755,000
Other Current
Liabilities
386,000,000 - -
Total Current
Liabilities
9,507,000,000 13,280,000,000 15,480,228,000
Long Term Debt 3,388,000,000 18,085,000,000 12,039,822,000
Other Liabilities 4,791,000,000 9,057,000,000 8,230,698,000
Deferred Long Term
Liability Charges
- - -
Minority Interest 96,000,000 92,000,000 86,312,000
Negative Goodwill - - -
Total Liabilities 17,782,000,000 40,514,000,000 35,837,060,000
10. Financial Statement Analysis
• Financial statement analysis is the process of
understanding the risk and profitability of a firm
through analysis of reported financial information,
by using different accounting tools and techniques.
It consists of :-
• 1) Reformulating reported financial statements
• 2) Analysis and adjustments of measurement errors
• 3) Financial ratio analysis on the basis of
reformulated and adjusted financial statements.
11. Financial Ratio Analysis
• Ratio Analysis is a technique of analysis and
interpretation of financial statements. It is
defined as the systematic use of ratios to
interpret the financial statements so that the
strengths and weaknesses of a firm as well as
its historical performances and current financial
condition can be determined.
• Ratios can be expressed as a decimal value,
such as 0.10, or given as an
equivalent percent value, such as 10%.
13. Liquidity Ratio
• It indicates the short-term position of the
organization and also indicates the efficiency with
which the working capital is being used.
Liquidity
Ratio
Current
Ratio
Quick
Ratio
14. Current Ratio
• The current ratio is an indication of a
firm's market liquidity and ability to meet
creditor's demands.
• Current ratio= Current Assets
Current Liabilities
• Standard Ideal value: 2:1
15. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Current
assets
19,247 31,323 23,76
9
22,318 23,314
Current
Liabilities
9,507 13,280 15,48
0
17,262 13,049
Current Ratio Comparison to Industry
Abbott
Laborat
ories
2.02 2.36 1.54 1.29 1.79
Industry
Health
Care
1.69 1.64 1.73 1.7 1.72
Current Ratio
16. Calculation & Interpretation
Year Calculation Ratio Interpretation
2011 23,769 15,480 1.54 Unsatisfactory
2012 31323 13,280 2.36 Satisfactory
2013 19,247 9,507 2.02 Satisfactory
Interpretation:
•As compared to Industry Health Care, the current ratio for years 2012
and 2013 are good.
•A high current ratio indicates that there are sufficient assets available
with the organization, which can be converted in the form of cash and a
low current ratio indicates that a firm may have difficulty meeting current
obligations.
•A too high current ratio signifies the availability of idle cash and
inefficient usage of current assets or short term financing facilities.
17. Quick Ratio
• The Acid-test or quick ratio or liquid
ratio measures the ability of a company to use
its near cash or quick assets to extinguish or retire
its current liabilities immediately.
• Quick Assets = Current Assets – (Inventory +
Prepaid Expenses)
• Quick ratio = Total quick assets Current liabilities
• Standard Ideal value: - 1:1
18. Quick Ratio
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Cash and cash
equivalents
3,475 10,802 6,813 3,648 8,809
Investments,
primarily bank
time deposits
and U.S. treasury
bills
4,623 4,372 1,285 1,803 1,123
Restricted funds
, primarily U.S.
Treasury Bills.
– – – 1,872 –
Trade receivables
less allowances
3,986 7,613 7,684 7,184 6,542
Total quick
Assets
12,084 22,787 15,781 14,508 16,474
Current liabilities 9,507 13,280 15,480 17,262 13,049
Quick Ratio, Comparison to Industry
Abbott
Laboratories
1.27 1.72 1.02 0.84 1.26
Industry Health
Care
1.19 1.17 1.27 1.21 1.2
19. Calculation and Interpretation
Year Calculation Ratio Interpretation
2011 12,084 9,507 1.27 Good
2012 22787 13,280 1.72 Good
2013 15781 15,480 1.02 Satisfactory
Interpretation:
•As compared to Industry Health Care, the Quick ratio for
years 2011, 2012 & 2013 are good.
•The greater the company's liquidity (i.e., the better able to
meet current obligations using liquid assets) and if less than
1 cannot currently fully pay back its current liabilities.
20. Profitability Ratio
• Profitability ratios measure the company's
ability to generate profitable sales from its
resources (assets).
Profitability
Ratio
Gross
Profit Ratio
Net Profit
Ratio
Operating
Ratio
21. Gross Profit Ratio
• The gross profit ratio indicates the relation
between production cost and sales.
• It measures company's manufacturing and
distribution efficiency during the production
process.
• Gross Profit Ratio = Gross Profit *100
Net Sales
22. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Gross
profit
11,808 24,754 23,311 20,502 17,555
Net sales 21,848 39,874 38,851 35,167 30,765
Gross
profit
margin
ratio
54.05% 62.08% 60.00% 58.30% 57.06%
Gross Profit Ratio
23. Calculation & Interpretation
Year Calculation Ratio
2011 100 23,311 38,851 60%
2012 100 24,754 39,874 62.08%
2013 100 11,808 21,848 54.05%
Interpretation:
•The gross profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•A high gross profit margin indicates that the company can make a
reasonable profit, as long as it keeps the overhead cost in control.
• A low margin indicates that the business is unable to control its
production cost.
24. Net Profit Ratio
• The net profit ratio indicates that portion
of sales available to the owners after the
consideration of all types of expenses and
costs either operating or non operating or
normal or abnormal
• FORMULAE
Net Profit Ratio = Net Profit after Taxes *100
Net Sales
25. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net
earnings
2,576 5,963 4,728 4,626 5,746
Net sales 21,848 39,874 38,851 35,167 30,765
Net Profit Margin, Comparison to Industry
Abbott
Laboratorie
s
11.79% 14.95% 12.17% 13.15% 18.68
%
Industry
Health Care
16.84% 15.92% 15.50% 14.38% 20.14
%
Net profit ratio
26. Calculation & Interpretation
Year Calculation Ratio
2011 100 4,728 38,851 12.17%
2012 100 5,963 39,874 14.95%
2013 100 2,576 21,848 11.79%
Interpretation:
•Net profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•The Net Profit Ratio of Abbott Laboratories is less as
compared to the Industry Health Care.
•A high ratio indicates the efficient management of the
affairs of business.
27. Operating Profit Ratio
• This ratio indicates the percentage of net
sales, which is absorbed by the operating
cost.
• This ratio excludes the non-operating
expenses such as administrative expenses ,
selling and distribution expenses.
• Operating Profit Ratio = 100 Operating
earnings Net sales
28. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Operating
earnings
2,629 8,085 5,752 6,088 6,236
Net sales 21,848 39,874 38,851 35,167 30,765
Operating Profit Margin, Comparison to Industry
Abbott
Laboratorie
s
12.03% 20.28% 14.81% 17.31% 20.27%
Industry
Health
Care
19.78% 21.20% 21.07% 20.08% 22.02%
Operating Profit Ratio
29. Calculation & Interpretation
Year Calculation Ratio
2011 100 5,752 38,851 14.81%
2012 100 8,085 39,874 20.28%
2013 100 2,629 21,848 12.03%
Interpretation:
•Operating profit margin improved from 2011 to 2012 but then
deteriorated significantly from 2012 to 2013.
•Operating Profit Ratio of years 2011, 2012and 2013 are less than the
Industry Health Care.
• A higher value of operating margin ratio is favourable which indicates
that more proportion of revenue is converted to operating income.
30. TURNOVER GROUP
• Ratios computed under this group indicate the
efficiency of the organization to use the various
kinds of assets by converting them in the form of
sales.
Turnover
Ratio
Inventory
Turnover
Ratio
Working Capital
Turnover Ratio
31. Inventory Turnover Ratio
• A ratio showing how many times a company's
inventory is sold and replaced over a period.
• A high inventory turnover ratio indicates that
maximum sales turnover is achieved with the
minimum investment in inventory.
• Inventory or Stock Turnover Ratio
= Cost of Goods Sold
Avg. Inventory
32. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net sales 21,848 39,874 38,851 35,167 30,765
Inventories 2,693 3,792 3,284 3,189 3,265
Inventory Turnover, Comparison to Industry
Abbott
Laboratories
8.11 10.51 11.83 11.03 9.42
Industry
Health Care
9.43 9.59 10.41 10.36 8.31
Inventory Turnover Ratio:
33. Calculation & Interpretation
Year Calculation Ratio
2011 38,851 3,284 11.83
2012 39,874 3,792 10.51
2013 21,848 2,693 8.11
Interpretation:
•The ITR of the company declined from year 2011 to 2012 and from
2012 to 2013.
•As compared to the Industry Health Care the Inventory Turnover Ratio
of Abbott Laboratories is good for year 2011 and 2012 and declined in
year 2013.
•A low turnover rate: overstocking or deficiencies in the product line or
marketing effort .
•A high turnover rate: inadequate inventory levels, leading to a loss in
business as the inventory is too low. This often can result in stock
shortages
34. Working Capital Turnover Ratio
• A measurement comparing the depletion of
working capital to the generation of sales over a
given period.
• A high working capital turnover ratio indicates
the capability of the organization to achieve
maximum sales with the minimum investment in
the working capital.
• Working Capital Turnover Ratio= Net Sales
Working Capital
35. Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Current
assets
19,247 31,323 23,769 22,318 23,314
Less:
Current
liabilities
9,507 13,280 15,480 17,262 13,049
Working
capital
9,740 18,042 8,289 5,055 10,264
Net sales 21,848 39,874 38,851 35,167 30,765
Working Capital Turnover, Comparison to Industry
Abbott
Laboratorie
s
2.24 2.21 4.69 6.96 3
Industry 3.64 4.07 3.74 3.74 3.38
Working Capital Turnover Ratio
36. Calculation & Interpretation
Interpretation:
• Working capital turnover deteriorated from 2011 to 2012 but then
slightly improved from 2012 to 2013.
• As compared to Industry Health Care working Capital turnover for the
year 2011 is good and less for the years 2012 and 2013.
• A high turnover ratio- management is being extremely efficient in using
a firm's short-term assets and liabilities to support sales.
• A low ratio- business is investing in too many accounts receivable and
inventory assets to support its sales, which could eventually lead to an
excessive amount of bad debts and obsolete inventory.
Year Calculation Ratio
2011 38,851 8,289 4.69
2012 39,874 18,042 2.21
2013 21,848 9,740 2.24
37. Solvency Group
• Ratios computed under this group indicate the
long-term financial prospects of the company.
The shareholders debenture holders and other
lenders of long-term finance/ term loan may be
basically under this group.
Solvency
group
Debt-equity
Ratio
Proprietary
Ratio
Interest
Coverage
Ratio
38. Debt-equity Ratio
• Debt-equity ratio indicates the state of
shareholders or owners in the organization.
• It indicates the cushion available to the creditors
on liquidation of the organization.
• Debt- equity Ratio = Total debt
Total shareholders' equity
• Standard Ideal value: - 2:1
39. Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Short-term borrowings 3,164 2,082 2,348 4,350 4,978
Current portion of long-
term debt
9 309 1,027 2,045 211
Long-term debt,
excluding current
portion
3,388 18,085 12,040 12,524 11,266
Total debt 6,561 20,476 15,415 18,918 16,456
Total Abbott
shareholders'
investment
25,171 26,721 24,440 22,388 22,856
Debt to Equity, Comparison to Industry
Abbott Laboratories1 0.26 0.77 0.63 0.85 0.72
Industry, Health Care 0.46 0.48 0.46 0.43 0.42
Debt-equity Ratio
40. Calculation & Interpretation
Year Calculation Ratio
2011 =15,415 / 24,440 0.63
2012 =20,476 /26,721 0.77
2013 = 6561/25171 0.26
Interpretation:
•Debt-to-equity ratio deteriorated from 2011 to 2012 but then
improved from 2012 to 2013 exceeding 2011 level.
•As compared to Industry Health Care, Debt-to-equity ratio of the
company was good for years 2011 & 2012 and deteriorated for year
2013.
•A low Debt- equity ratio is considered good according to creditors view
as it is secure.
•A high Debt- equity ratio is considered risky according to creditors view
as it gives lesser margin of safety on liquidity of company.
41. Proprietary Ratio
• This ratio indicates the extent to which the
owner funds are sunk in different kinds of
assets.
• The proprietary ratio shows the contribution
of stockholders’ in total capital of the
company.
• Best Ratio considered as 33%
• Proprietary Ratio = Total Shareholders Fund
Total Asset
42. Year 2013 2012 2011
Total Assets 42953 67235 60276
Total Abbott shareholders'
investment
25171 26721 24440
Proprietary Ratio 0.58 0.39 0.40
Proprietary Ratio
43. Calculation & Interpretation
Interpretation:
•The proprietary ratio for Abbott Laboratories improved in 2013 as
compared to 2012 and 2011.
• The higher the ratio dependency on external sources and loans for
working capital will be less and financial condition will be sound.
• A low ratio indicates that the company is already heavily depending on
debts for its operations.
Year Calculation Ratio
2011 24440/ 60276 0.40
2012 26721/ 67235 039
2013 25171/ 42953 0.58
44. Interest Coverage Ratio
• This ratio indicates protection available to the
lenders of long-term capital in the form of funds
available to pay the interest charges i.e. profits.
• It means how easily a company can pay interest
on outstanding debt.
• Interest Coverage = Earning Before Interest& Tax
Ratio Interest expense
45. Interest Coverage Ratio
Years Dec 31,
2013
Dec 31,
2012
Dec 31,
2011
Dec 31,
2010
Dec 31,
2009
Selected Financial Data (USD $ in millions)
Net earnings 2,576 5,963 4,728 4,626 5,746
Add: Interest
expense
157 592 530 553 520
Add: Income tax
expense (benefit)
138 300 470 1,087 1,448
Earnings before
interest and tax
(EBIT)
2,871 6,855 5,729 6,266 7,713
Interest Coverage, Comparison to Industry
Abbott
Laboratories1
18.29 11.57 10.81 11.33 14.84
Industry, Health
Care
15.43 14.51 15.23 14.01 19.04
46. Calculation & Interpretation
Year Calculation Ratio
2011 5,729/530 10.81
2012 6,855/592 11.57
2013 2,871/157 18.29
Interpretation:
Interest coverage ratio improved from 2011 to 2012 and from 2012 to
2013.
As compared to Industry Health Care Interest Coverage Ratio of
company is good for year 2013 and satisfactory for year 2011 and 2012.
The lower the ratio, the more the company is burdened by debt
expense.
The higher the ratio the more secure the lender is in the payment of
the interest regularly.
47. Conclusion
As per year 2013-
• The current and quick ratios are good.
• The Gross Profit Ratio ,Net Profit Ratio and
Operating Profit Ratio has deteriorated.
• The Inventory Turnover Ratio has declined
while Working Capital Turnover Ratio has
slightly improved.
• The Debt-Equity Ratio, Proprietary Ratio
and Interest Coverage Ratio has improved.