IOCL in comparison to its competitor i.e. HPCL has a better liquidity position except for the year 2008-09 where HPCL has a better position. The ideal current ratio of 1.5 has not been achieved by any of the company mainly because of the nature of the O&G industry .Current ratio also represents the margin of safety for creditors. There is need for the safety margin for the inevitable unevenness in the flow of funds through current asset and current liability account. The flow should be absolutely smooth and uniform each year so that the current assets are sufficiently large than the current liability so that the firm is able to pay its current maturing debt when it becomes due. The trend of current ratio is represented in the chart above for a better understanding. In this chart a fluctuating trend can be noticed in case of IOCL. However, IOCL has a better ratio compared to its competitor apart from the year ending Mar' 09. Thus, IOCL has a better short term solvency position than HPCL even though it has not reached the ideal ratio i.e. 1. However, considering that the company is dependent on the government grants and subsidies, IOCL is in a safe zone and hence it enjoys a good creditworthiness and goodwill. The above table shows the quick ratio. From the table the quick ratio is increasing for the past few years hence the liquidity position of the firm is better in the current year compared to its own past position and position of HPCL. Clearly HPCL has greater proportion of debt in comparison to the equity and is highly levered whereas IOCL is least levered. This signifies that IOCL follows a conservative approach compared to its competitors whereas HPCL follows comparatively aggressive approach taking more r... ... middle of paper ... ... Since the amount not distributed as dividend is retained earning which is 1-dividend payout ratio so almost 60% of earning are retaining by the companies which is utilized for research, exploration and development purposes as there is always a need to plan and develop new products to satisfy the new and changing demands. The earnings per share for both the companies is following a zigzag trend due the change in net income for the respective years. In the years 2010 and 2011 the earning per share of IOCL has decreased in comparison to HPCL due to increase in number of shares from 119.47 to 242.7. The share capital of IOCL is quite large in comparison HPCL i.e. IOCL’s equity share capital is 2427.95(crore)and that of HPCL is of 339.1(crore) but the profit earned by the company is not much in contrast to each other so EPS of IOCL is in same range as of HPCL.
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
This ratio helps in analysing the position of the company to satisfy its short term debts within a period of one year. The higher the current ratio would be the more the company will be in position to satisfy its short term debts.
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
Current Ratio – For the last three years was growing from 3.56 in 2001 to 3.81 in 2002 to 4.22 in 2003. The reason of grow is increased in Assets. Even though Liability was growing, Asset grow was more significant.
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
In regards to the corporation’s balance sheet, it is necessary to place an importance on liquidity ratios to demonstrate the company’s ability to pay its short term obligations such as accounts payable and notes that have a duration of less than one year. These commonly used liquidity ratios include the current ratio, quick ratio, and cash ratio. All three ratios are used to measure the liquidity of a company or business. The current ratio is used to indicate a business’s ability to meet maturing obligations. The quick ratio is used to indicate the company’s ability to pay off debt. Finally the cash ratio is used to measure the amount of capital as well short term counterparts a business has over its current liabilities.
Firstly, based on the profitability, P&G has earned higher profit from each dollar of revenue which is 13.4% compared to C-P 12.9% for the recent year 2013. In addition, P&G also has higher EPS of US$4.04 compare to C-P US$2.41. In contrast, C-P register a Gross Profit of 58.7% and Return on Equity of 91.0% as opposed to P&G’s 49.6% and 17.0% respectively. C-P seems to rely heavily on debt and this has helped to improve the Return of Equity. P&G also has its downside in asset turnover ratio (0.62) and fixed turnover
By taking into account only the most liquid assets, ratio 1.0 in 2013 and 2012, which increased by a small margin 0.2 from 2011, indicates that company has strong liquidity position.
Sometimes it’s not easy to say that a company is in good or bad health. It would be extremely difficult to just look at a company’s financial statement and tell that the company is doing well. To make it easier to compare company’s health, we have to associate number values known as ratios that are calculated from a company’s financial statements. These number values or ratios can then be compared to other company’s ratios, in the same industry, to show which company has a better health. The ratios that are being spoken about are called financial ratios. Very common types of financial ratios are liquidity ratios, profitability ratios and leverage ratios.
243). Profitability ratio include profit margin on sales, rate of return on assets, rate of return on common share equity, earning per share, price earnings ratio and payout ratio. The profit margin on sales of 2014 is 0.23 and 0.17 on 2013 which shows MLF managed to convert 0.23 of its sales into net income. The profit margin on sales is higher in 2014 than 2013. The rate of return on asset of 2014 is 0.22 and in 2013 is 0.15. Higher values of return on asset shows that business is more profitable. The rate of return on asset of 22 % of 2014 mean that for each dollar in asset, the MLF’s generated 22 cent in profits. The MLF’s rate of return on share equity earned 0.35 in 2014 and in 2013 is 0.39 which means that every shareholders saw a 35% return on their investment in 2014 as compared to 2013 return on investment is higher that is 39%. Higher values are generally favourable because it shows that the company is productive in generating income on new venture. EPS is important profitability ratio, especially for shareholders of an organization, since it is an instant measure of dollars earned per share. MLF’s Earnings per share in 2014 is 4.71 in 2014 and 3.46 in 2013. Therefore, it shows that MLF’s earned 4.71 on each common share which is higher than 2013. MLF’s higher earnings per share indicates that it is capable of generating a significant dividend
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
The basic earnings per ordinary share in 2016 is RM19.14 and RM14.30 in 2015. This shows that the ordinary share had been increased RM4.84 compare to 2016 based on 2015. In the other hand, this company had declared a first interim single-tier dividend of 10 sen per ordinary share amounting to RM22.88 million in respect of the financial year ended 31 December 2016. They sold their ordinary shares of RM400,000,000 units of RM0.50 per each in 2016 and RM200,000,000 units of RM0.50 per each in 2015 to their shareholders. It is increased from 2015 to 2016 with 200,000,000 units. The other investments that available for sale is RM1000 same as in 2015 and 2016.
The term liquidity means cash in hand which a firm required to meet its short term obligations. The ratios which come under this category are Current ratio, Quick/ Acid-Test ratio, and Cash ratio.
Making an analysis of the profitability of the shareholder can be seen that although both companies have similar returns, the source of this return is different.