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Term Paper: BUS 635

Financial Analysis Report: Double A Report by Group 5


Chowdhury Farhadul Reza Mussabirul Islam Rian Binte Zaman Sifat Rabbani Md. Raihan Ali 1130347060 1130074660 1220492660 1130456060 1121040060

TERM PAPER: BUS 635

Financial Analysis Report: Double A

Executive Summary
Ratio analysis is a method of analysing data to determine the overall financial strength of a business. This tool is very crucial for a company as financial analysts takes the information off the balance sheets and income statements of a business and calculate ratios that can then be used to make assessments of the operating ability and future prospects of that business. Double A (1991) Public Company Limited operates an advanced pulp and paper manufacturer manufacturing facility, producing many types of quality writing and printing papers. Fuelled by the success, the Company is determined to become one of the worlds leading paper manufacturers in the near future. But in the face of Global recession and in the dawn of paper less world, it will be interesting to investigate the financial performance of the company through the last few years. This report will analyse the last 5 years (2007 -2011) financial statements of the company and evaluate the key ratio analysis to determine the current financial performance of the company. In addition to that the report will also assess the companies current and future plan of action and its impact on the company based on the current financial situation. Moreover the report will try to shed some lights on the overall performance over the year and provide feedback on how to improve on the financial performance of the company.

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Financial Analysis Report: Double A

Table of Contents
Introduction ...................................................................................................................................... 6 Company Profile ................................................................................................................................ 7 Company History ........................................................................................................................... 7 Company Vision ............................................................................................................................. 7 Company Overview ........................................................................................................................ 8 Products and Services .................................................................................................................... 9 Timeline ...................................................................................................................................... 10 Company Structure.......................................................................................................................... 13 Investment in Subsidiaries ........................................................................................................... 14 Revenue Structure ........................................................................................................................... 14 Capital Structure ............................................................................................................................. 15 Companys securities ................................................................................................................... 15 Shareholders ............................................................................................................................... 15 Dividend Payment Policy ................................................................................................................. 16 The Company Dividend Policy ...................................................................................................... 16 Subsidiaries and Associates Dividend Policy ................................................................................. 16 Human Resource Management.................................................................................................... 16 Financial Condition Analysis............................................................................................................. 17 Financial Performance (2011) .................................................................................................... 17 Analysis of Financial Status ......................................................................................................... 18 Potential Future Operations ........................................................................................................ 19 Ratio Analysis .................................................................................................................................. 20 Liquidity Ratio.............................................................................................................................. 21 Asset Management ratio ............................................................................................................. 23 Debt Management Ratio.............................................................................................................. 27 Profitability.................................................................................................................................. 28 Market Value ............................................................................................................................... 33 Recommendation ............................................................................................................................ 36 Conclusion....................................................................................................................................... 38 Bibliography .................................................................................................................................... 39

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Financial Analysis Report: Double A

Table of Figures
FIGURE 1 COMPANY STRUCTURE OVERVIEW (DOUBLE A (1991) PUBLIC COMPANAY LIMITED, 2011) ..................................... 13 FIGURE 2 INVESTMENT SUMMARY 2012 (DOUBLE A (1991) PUBLIC COMPANY LIMITED, 2012)............................................... 14 FIGURE 3 OVERVIEW OF REVENUE STRUCTURE 2012 (DOUBLE A (1991) PUBLIC COMPANAY LIMITED, 2011).......................... 14 FIGURE 4 DISTRIBUTION OF COMPANY SHARES (DOUBLE A (1991) PUBLIC COMPANY LIMITED, 2012) .................................... 15 FIGURE 5 OVERVIEW OF THE HUMAN RESOURCE M ANAGEMENT ........................................................................................... 16 FIGURE 6: FINANCIAL CONDITION OVERVIEW (2007-2012) (DOUBLE A (1991) PUBLIC COMPANAY LIMITED, 2011) ................. 18 FIGURE 7 FINANCIAL HIGHLIGHTS FOR THE LAST 7 YEARS (DOUBLE A (1991) PUBLIC COMPANAY LIMITED, 2011) ................... 19

Table of Graphs
GRAPH 1 RATIO ANALYSIS FOR DOUBLE A PUBLIC COMPANY LIMITED (2007 -2011) .............................. 21 GRAPH 2 LIQUIDITY RATIO (2005-2011) ..................................................................................... 22 GRAPH 3 INVENTORY TURNOVER (2007 2011) ........................................................................... 23 GRAPH 4 ACCOUNTS RECEIVABLE TURNOVER (2007 - 2011) ............................................................ 24 GRAPH 5 AVERAGE COLLECTION PERIOD (2007 2012).................................................................. 25 GRAPH 6 ASSET TURNOVER RATIO (2007 - 2011) .......................................................................... 26 GRAPH 7 DEBT RATIO (2007 - 2011) .......................................................................................... 27 GRAPH 8 DEBT EQUITY RATIO (2007 - 2011) ............................................................................... 28 GRAPH 9 PROFIT MARGIN (2007) ............................................................................................... 29 GRAPH 10 OPERATING EXPENSE RATIO (2007 -2011) .................................................................... 30 GRAPH 11 RETURN ON ASSETS (2007 - 2011) .............................................................................. 31 GRAPH 12 RETURN ON EQUITY (2007 - 2011) .............................................................................. 32 GRAPH 13 DIVIDEND AND EARNINGS PER SHARE (2007 - 2012) ........................................................ 33 GRAPH 14 DIVIDEND PAYOUT RATIO (2007 - 2011) ....................................................................... 34 GRAPH 15 BOOK VALUE PER SHARE (2007 - 2011) ........................................................................ 35 GRAPH 16 DIVIDEND YIELD (2007 - 2011) ................................................................................... 36

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Financial Analysis Report: Double A

Methodology
The primary date for this report is acquire from the official Annual Report of Double A Public Company. The Annual Report was obtained from the Company website. The report used the financial data from 2007 to 2011, as of 2012 data, it was unavailable till the end of the year. Various secondary data has been used while compiling these report and related reference were given on the Reference section. The graph used in these report were created by the team member using Excel worksheet, in addition to that many of the financial value were given in terms of bath and so for the ease of the reader we have converted them to US dollars using the current exchange rate.

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Financial Analysis Report: Double A

Introduction

Ratio analysis is a method of analysing data to determine the overall financial strength of a business. This tool is very crucial for a company as financial analysts takes the information off the balance sheets and income statements of a business and calculate ratios that can then be used to make assessments of the operating ability and future prospects of that business. These ratios are useful only when compared to other ratios, such as the comparable ratios of similar businesses or the historical trend of a single business over several business cycles. This report has been written in regards to the requirement of the BUS 635 course. Double A, a familiar name in the paper manufacturing industry, has been dominating the paper industry. Double A Paper, with its premium quality product and effective branding has been able to spread its distribution coverage in more than 100 countries worldwide and at the same time has been well accepted by consumers across all market regions. The Company had expanded its business operations through its international marketing & services network not only in Asian countries such as the Philippines, Vietnam, Pakistan, Bangladesh but also the United Arab Emirates, and a few European countries. Double A paper has been well received by consumers in these countries and this is reiterated by the fact that the purchase orders of Double A Paper have exceeded its production capacity. Fuelled by the success, the Company is determined to become one of the worlds leading paper manufacturers in the near future. But in the face of Global recession and in the dawn of paper less world, it will be interesting to investigate the financial performance of the company through the last few years. This report will analyse the last 5 years (2007 -2011) financial statements of the company and evaluate the key ratio analysis to determine the current financial performance of the company. In addition to that the report will also assess the companies current and future plan of action and its impact on the company based on the current financial situation. Moreover the report will try to shed some lights on the overall performance over the year and provide feedback on how to improve on the financial performance of the company.

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Financial Analysis Report: Double A

Company Profile
Company History
Double A (1991) Public Company Limited operates an advanced pulp and paper manufacturer manufacturing facility, producing many types of quality writing and printing papers. The company was incorporated in 1991. Located in Thailands central plains in the province of Prachinburi, the mill began operating in 1995 and has an annual capacity of 600,000 tons of pulp and 600,000 tons of paper. The company has established their vast network with many factory mills and their network offices include domestic and overseas branches all over the world. (Double A (1991) Public Companay Limited, 2011)

Company Vision
Double As vision is to deliver premium quality copy and office paper to consumers around the world that is produced from a sustainable source of high-fiber raw material (Double A (1991) Public Companay Limited, 2011) Central to that vision are the principles of sustainable development internationally and a commitment to faithfully and practice spearhead

recognized

standards

environmental and social campaigns that are relevant to the development of the communities. In tune to its mission, Double A adheres to environmental management policies for its operation. The company faithfully practices international standards and spearheads significant environmental campaigns. As evidence, the company has received

commendations/awards in Thailand and all over the world for its unwavering corporate social and environmental responsibility. (Double A (1991) Public Company Limited, 2012)

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Financial Analysis Report: Double A

Company Overview
Double As strong brand performance can be attributed to its consistent and timely branding activities, integrated marketing communications, public relations, marketing events and instore displays that promote the brand among consumers initiatives that have helped Double A to dominate top of mind awareness in every key market in the world. Double A has fostered enduring relationships with consumers based on trust, quality, ease of use, availability, and the companys sustainable environmental practices and contributions to the communities they serve, all of which add up to total consumer value rather than the customary price concerns.

Double As global presence is another of its competitive advantages. From Thailand, the company began to expand its international reach in 2001, making inroads on Hong Kong, Malaysia, Singapore, Taiwan and China, entered Australia and the Middle East in 2007, and ventured into Europe, Africa, South Asia and North America in 2011. Top quality, reliability, value for money, and wide availability these are the internationally recognized characteristics that have made Double A the leading copy paper brand in Thailand and more than 100 other countries around the world. Today, Double As presence in more than 120 countries on six continents is a testament to a truly global brand with a premium product of unmatched quality and brand awareness in its key markets around the world. Double A continues to set records for brand awareness; thanks to its consistent No jam...No Stress marketing campaign which has succeeded in differentiating the brand and communicating its core values:

o Smoothness for jam-free copying. o High opacity for double-sided printing. o Farmed trees for a sustainable, environmentally
friendly paper-making process.

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Financial Analysis Report: Double A

Products and Services


The companys broad portfolio of products extends from superior quality short fiber large paper sheets to and

innovative

stationery

products

premium copy papers all made of sustainable fiber from Double As Paper Tree, which is grown along the rice paddy ridges of more than 1.5 million farmers across Thailand through a

uniquely Asian solution to the sustainable sourcing of fiber that is called Paper from Farmed Trees. Strategically situated 140km from Bangkok and 130km from Laem Chabang Seaport, the Double A mill is close to both a sustainable source of wood and a huge rainwater reservoir with a capacity of 36 million cubic meters to sustain its manufacture of pulp and paper. From its beginnings, when Double A pioneered the research and development of tree species serigraph for an energy-intensive industry, the company has devoted all of its considerable resources to the development of green pulp and paper manufacturing through its Paper from Farmed Trees program, in the process turning our solid waste streams into clean, renewable bio-fuel power sources to generate electricity and steam to meet the countrys rising demand sustainably. The brand launched was supported by 7 unique and remarkable qualities of Double A Paper:

Printing Sharpness Excellent Smoothness Bright Appearance Enhanced Copier Performance Two-Sided Use Longer Storage Period for Documents
Double A offers a wide range of paper products to suit the needs, requirements and budgets of the customers around the world. Known for their high quality, superior performance and environmental friendliness, Double A products meet everyones paper needs. Double A manufactures two types of printing and writing paper:

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Financial Analysis Report: Double A

Uncoated Wood-Free Paper - This is the paper of choice for printing and writing purposes and is produced in a variety of weights ranging from 50 to 120 grams per square meter, or GSM. Available in both rolls and sheets, the paper is also cut into standardized sizes and sold under the Double A brand.

Coated Paper or Art Paper - Coated on both sides with a white material for a smooth, glossy surface, this paper is available in both rolls and sheets.

Double A produces three grades of pulp: Slurry Pulp accounts for 40% of the pulp we produce and is piped to our two papermaking machines. Dry Pulp accounts for about 50% of the pulp produced; with a moisture content of 10%, it is sold domestically and exported. Wet Lap Pulp accounts for about 10% of the pulp produced; with a moisture content of 50%, it is sold to both domestic customers and a subsidiary, Hi-Tech Paper Co., Ltd., to be used in paper production.

Timeline
The establishing and development of Double A (1991) Public Company Limited 1989 - First establishment of the company. 1990 -99 Group Center Company Limited was established as a domestic paper distributor to end user Hi-Tech Paper Company Limited was set up to produce uncoated paper, which produces 41,000 tons of paper per year. 1993 - The contract of technical production assistance with OJI PAPER Co.,Ltd., the Japans largest pulp and paper manufacturer, was signed. 1993- The contract to set up the advisory board of Project Management Service with Jaakko Pyry Oy Ltd. the internationally well known pulp and paper company from Finland, was signed. 1994 -It has been registered as a public limited company and changed its name to Advance Agro Public Company Limited 1995- The company started its production of uncoated printing paper in the first paper mill on November 6th, 1995.

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Financial Analysis Report: Double A

1996 -The grand opening of Advance Agro Public Company Limited at Queen Sirikit National Convention Center in July 6th, 1996. AA received Industrial excellence for outstanding performance in the field of environmental conservation from Thailands Industrial Department. 1997- Advance Agro Public Company Limited was the first integrated pulp and paper manufacturer in Southeast Asia to be certified with ISO 14001 the environmental management standard from AJA EQS, England in the practice of UKAS (UNITED KINGDOM ACCREDITATION SERVICE) in November 18th, 1997. 1998- The second pulp mill under AA Pulp Mill 2 Company Limited started its operation process and pulp exportation to Europe. Advance Agro Public Company Limited strengthened its relationship with its foreign partners, STORA ENSO OYJ, Europes largest pulp and paper manufacturer and OJI PAPER CO.,Ltd., Asias largest pulp and paper manufacturer. The Company set up a subsidiary, A.A. Pulp Mill 2 Company Limited to produce bleached eucalyptus Kraft pulp. The plant has production capacity of 252,000 ton per annum. The subsidiary sales consist of both domestic and export sales to such as China, Korea, and Australia. 2000 - The grand opening/introduction of Double A paper (companys 80 GSM paper) in BOI Fair at IMPACT Arena Muang thong thani. 2001 -Advance Agro Public Company Limited was certified with ISO 9001:2000 the quality management standard from AJA EQS, England in the practice of UKAS (UNITED KINGDOM ACCREDITATION SERVICE) in March 2nd, 2001. 2002 -The Company set up a subsidiary, Double A Copy Center Company Limited to carry out the Double A Copy Center Project. The project goal is to penetrate into retail market by joining with small-scale photocopy shops. 2003 -The Company set up A.A. Paper and Stationery Company Limited to manage and distribute stationeries for domestic customers. The subsidiary is also in charge of carrying out marketing activities, sales and promotions. 2004 - In 2004, the Company set up 99 Group Trading Center Company Limited to serve as a domestic paper distributor.

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Financial Analysis Report: Double A

2005 - Advance Agro Holding Company Limited extended its joint-venture contract on precipitated calcium carbonate (PCC) production project with Specialty Mineral (Thailand) Company Limited. The company also issued 250 million USD Bond on March 19 from its joint venture. The joint venture was set up under the name Hi-Tech Specialty Mineral (Thailand) Limited, which the Company hold 51% interest. 2006 -The Company set up Double A Paper Company Limited to conduct the feasibility of investing in additional printing and writing paper mill and its name has been changed to Advance Paper Mill 3 Company Limited. 2007- The Company set up Biomass Steam Company Limited to produce high pressure steam (PB5A) and D.A. Packaging Company Limited to produce the packaging product. 2008- The Company listed off from SET on April 17. 2009- The Board of Directors resolved the streamline operations to give a greater focus on improving Double A Paper brand expansion by dissolving 4 subsidiaries by transferring the assets to Advance Agro Public Company Limited and A.A. Paper and Stationery Company Limited. The dissolved companies were Double A International Business Company Limited, Double A Copy Center Company Limited, A.A. Core Company Limited and Advance Paper Company Limited. This was completed on November 23, 2009. Moreover, Advance Agro Holding Company Limited sold 99.99% of its shares in 99 Group Trading Center Company Limited and A.A. Paper and Stationery Company Limited to Double A International Network Company Limited on December 30, 2009. 2010 -The Company changed its name to Double A. (1991) Ltd. (Thailand) on May 3. Moreover the company issued 5,000 million THB Bond on June 11 and 2,500 million THB Bond on August 27.

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Financial Analysis Report: Double A

Company Structure

Figure 1 Company Structure Overview (Double A (1991) Public Companay Limited, 2011)

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Financial Analysis Report: Double A

Investment in Subsidiaries

Figure 2 Investment summary 2012 (Double A (1991) Public Company Limited, 2012)

Revenue Structure

Figure 3 Overview of Revenue Structure 2012 (Double A (1991) Public Companay Limited, 2011)

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Financial Analysis Report: Double A

Capital Structure
Companys securities
The Company has registered capital of Baht 5,809,505,810 and fully paid capital of Baht 4,833,336,890. The Company has 483,333,689 ordinary shares at par of Baht 10 Other securities that are not common-share are as follow:

Shareholders

Figure 4 Distribution of company Shares (Double A (1991) Public Company Limited, 2012)

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Financial Analysis Report: Double A

Notes: As of 31 December 2011 the Company has 255 shareholders which can be split into the following: (1) 244 Thai shareholders with total amount of 7,886,850 shares or 1.63% (2) 11 Foreign shareholders with total amount of 475,446,839 shares or 98.37%

Dividend Payment Policy


The Company Dividend Policy
The Company shall pay dividend not less than 50% of its net profit after deduction of all specified reserves, subject to the Company and its subsidiaries investment and financing plans, covenants of the outstanding debenture and as the board of directors of the Company deems appropriate.

Subsidiaries and Associates Dividend Policy


The Company subsidiaries and affiliates shall pay dividend not less than 100% of each company net profits after deduction of all specified reserves (if any) subject to the subsidiaries and associates investment and financing plans, covenants of the outstanding debenture and as the board of directors of the Company deems appropriate .

Human Resource Management

Figure 5 Overview of the Human Resource Management

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Financial Analysis Report: Double A

Financial Condition Analysis


Financial Performance (2011)
In 2011, the Company aggregate sales revenue as compared with 2010, decreased by THB 148 million. This fall was due to the pulp price in market was decreased and the cost of goods sold was increased due to the rising of raw material cost. Another reason was from the increase of asset valuation which affected to the depreciation that included in the cost. In addition, there was a high market competition and the Company has expanded the market to global that affected the marketing expenses. Hence, the Company has loss with the net loss at THB 153 million, decreased from the previous year at THB1, 286 million and the primary earnings per share were THB 0.26. (Double A (1991) Public Companay Limited, 2011)

The details of revenues and expenses are as follows: a. Revenue from sales of paper and pulp The Company and its subsidiaries report paper and pulp revenue at THB 18,317 million, which decreased 0.80 % from the previous year. The paper and pulp sales volumes were not much different from 2010. The main reason that makes revenue dropped was from the pulp price that decreased in the market. b. Foreign Exchange Gains The Company and its subsidiaries reported the decreased in gain from foreign exchange of THB 241 million. c. Selling and Administration Expresses (SG&A) Selling and Administration Expenses was THB 4,713.35 million or 25.73 % of the total revenue. SG&A in 2010 was at THB 4,705.75 million or 25.48 % of the total revenue. The increase was due to the marketing expenses for promoting Double A brands to global. d. Financial Expenses In 2011, the Company and its subsidiaries reported financial expenses of THB 896.13 million, which decreased THB 277 million from the previous year, due to the redemption of debenture in 2009.

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Financial Analysis Report: Double A

Analysis of Financial Status According to the financial statement ending of December 31, 2011, the Company and its subsidiaries had total assets of THB 33,801.60 million, total liabilities of THB 20,238.24 million and share holders equity of THB 13,563.36 million. The equity book value was THB 28.06 per share. a. Assets Total assets increased by THB 6,376 million from the previous year due to the increase in non- current assets of THB 6,376 million, which composed of the increase in

evaluation of property, plant and equipment of THB 5,136 million, the increase of investment in subsidiaries of THB 1,110 million, the decrease of current asset of 354 million, decrease of cash of THB 725 million, trade account receivables net

decreased THB 308 million and inventory increased of THB 1,185 million. b. Liabilities Total liabilities increased by THB 3,382 million due to the increase of short term loan for investing in subsidiaries and for long term repayment. c. Shareholders Equity
Figure 6: Financial Condition overview (2007-2012) (Double A (1991) Public Companay Limited, 2011)

Shareholders Equity increased THB 2,993 million due to the Appraisal surplus which increased by THB 3,227 million and the Investments in subsidiary decreased. Another reason was due to the loss from the operation. Cash flow statement The Company and its subsidiaries had net cash flow from operating activities of THB 1,059 million, net cash flow from investing activities of THB 3,780 million and net cash flow from financing activities of 2,000 million. Total net cash flow for 2011 decreased THB 725 million, carried over from the previous year of THB 1,051million, the Company had a cash balance of THB 326 million as of financial statement ending December 31, 2011.

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Financial Analysis Report: Double A

Potential Future Operations


In 2012, the Company looks forward to manage costs and expenses by managing the raw materials purchase. Utilize lime which the Company can produce by itself instead of order from outsource, reduce the usage of long fibre, reduce the multi process of wood transportation etc. the Company expects to increase the sale volume by expanding the international market.

Figure 7 Financial highlights for the last 7 years (Double A (1991) Public Companay Limited, 2011)

From the above Graph it is observer that the company is suffering loss in 2011. This is mainly due to significant rise in total liabilities and asset whereas sale revenue where not generates as much in 2011.

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Financial Analysis Report: Double A

Ratio Analysis
Ratio Analysis provides us with the means by which financial information can be analysed and evaluated. In short, ratios are used to interpret financial statement. They attempt to highlight the relationships between significant items in the accounts of an organization. It is used to compare a firms perfo rmance and status with that of other firms or to itself over time. By calculating the ratios we can assess the profitability, efficiency, performance, solvency and status of the organization. Ratios can also be used in forecasting and planning as well as to summarize data. Assisting decision making is another way to use ratio analysis. Ratios can also identify problems before they became acute. Ratio analysis does not consider the non-quantitative information, such as the goodwill, labour relations and the Research and Development program. It does not include some of the positive factors within a business such as the quality of the staff or the location, both of which affect performance. Even though Ratios helps to recognize the problems; however, they will not provide the business with the solutions. Nevertheless, ratio is considered to be the best available technique for evaluating performance. The Following Graph illustrates the summarised result for the entire ratio calculated in this report. The later part of the report will comprise of detail analysis of these ratio to evaluate the performance of the Company for the last 5 years.

Ratios Current Ratio (times) Quick Asset Ratio (times) Inventory Turnover (times) Accounts Receivable Turnover Avg Collection Period (days) Gross Profit Margin Operating Profit Margin: Net Profit Margin Operating Expense Ratio

2007 1.05 0.55 5.10 10.95 33.34 26.41% 15.45% 1.83% 10.97%

2008 0.73 0.24 4.01 13.67 26.70 26.56% 14.33% 2.95% 12.22%

2009 1.17 0.82 4.67 11.08 32.94 34.75% 24.67% 10.96% 10.08%

2010 0.86 0.44 3.91 10.64 34.32 32.28% 19.41% 6.14% 12.87%

2011 0.54 0.16 3.11 11.38 32.08 24.94% 13.06% 0.84% 11.88%
20

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Financial Analysis Report: Double A 1.49% 2.93% 0.817 1.086 48.65% 0.95 0.81 11.89
82% 18% 27.55 34.012346 43%

2.29% 4.80% 0.776 0.984 52.27% 1.1 1.26 1.92


78% 22% 25.16 19.9683 8%

7.57% 14.90% 0.690 1.022 49.23% 0.97 4.1 1


13% 87% 24.99 6.09512 4%

4.13% 10.72% 0.673 0.890 61.46% 1.59 2.45 3.22


74% 26% 20.76 8.47347 16%

0.45% 1.13% 0.542 0.667 59.87% 1.49 0.26 0.28


48% 52% 28.06 107.923 1%

Total Asset Turnover (times) Fixed Asset Turnover (times) Debt Ratio Debt Equity Ratio (times) Earnings Per Share (Bath) Dividend Per Share (Bath) Dividend Payout Ratio Retention Ratio Book value per share Market Value ratio Dividend Yield

Graph 1 Ratio analysis for Double A Public Company Limited (2007 -2011)

The Ratios can be grouped into several categories: Liquidity ratio Asset Management Debt Management Profitability ratio Market Value Investors ratio

Liquidity Ratio
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due. Most common examples of liquidity ratios include current ratio, acid test ratio (also known as quick ratio) Current Ratio
=

Acid test ratio


=

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Financial Analysis Report: Double A

1.2 1

0.8
0.6 0.4
Industry Average 1.5

Current Ratio (times) Quick Asset Ratio (times)

0.2 0

2007

2008

2009

2010

2011

Graph 2 Liquidity Ratio (2005-2011)

The higher the ratio, the more liquid the company is. Commonly accep Graph current ratio is 2; it's a comfor Graph financial position for most enterprises. Accept Graph current ratios vary from industry to industry. For most industrial companies, 1.5 may be an accept Graph current ratio. Low values for the current ratio (values less than 1) indicate that a firm may have difficulty meeting current obligations. However, an investor should also take note of a company's operating cash flow in order to get a better sense of its liquidity. A low current ratio can often be supported by a strong operating cash flow. If the current ratio is too high (much more than 2) then the company may not be using its current assets or its short-term financing facilities efficiently. This may also indicate problems in working capital management. (Ready Ratio, 2011)As for Double A, the current ratio is below industry average as of 2011 which indicate they will face difficulties in paying out their current obligations. If the value of the acid-term ratio is less than 1, then it is said that such a company is not sGraph and may face difficulty is paying off their debts (short term). In order to clear the short term debts they probably would need to sell some of their assets. But such an option affects the overall position of the company because if the company owns very little assets. The biggest advantage of acid-test ratio is that it helps the company in understanding the end results very feasibly. (Ready Ratio, 2011)

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Financial Analysis Report: Double A

Asset Management ratio


Asset management (turnover) ratios compare the assets of a company to its sales revenue. Asset management ratios indicate how successfully a company is utilizing its assets to generate revenues. Asset management ratios are computed for different assets. Common examples of asset turnover ratios include fixed asset turnover, inventory turnover, accounts receivable turnover ratio and average collection period. These ratios provide important insights into different financial areas of the company and its highlights its strengths and weaknesses. Inventory turnover

Inventory Turnover (times)


6.00 5.00 4.00 3.00 2.00 1.00 0.00 2007 2008 2009 2010 2011

Inventory Turnover (times)

Graph 3 Inventory Turnover (2007 2011)

Inventory turnover is a measure of the number of times inventory is sold or used in a given time period such as one year. It is a good indicator of inventory quality efficient buying practices, and inventory management. This ratio is important because gross profit is earned each time inventory is turned over. The ratio calculated by the following formula: Inventory turnover = Cost of goods sold / Average Inventory There is no general norm for the inventory turnover ratio; it should be compared against industry averages. A relatively low inventory turnover may be the result of ineffective inventory management and poor sales or carrying out-of-date inventory to avoid writing off inventory losses against income. Normally a high number indicates a greater sales efficiency and a lower risk of loss through un-saleable stock. However, too high an inventory turnover that is out of proportion to industry norms may suggest losses due to shortages, and poor customer-service. According to the above graph, the Double A inventory turnover have is on a decline path which is undesirable for the firm if continued in these pattern.
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Financial Analysis Report: Double A

Accounts Receivable Turnover

Accounts Receivable Turnover


14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2007 2008 2009 2010 2011

Accounts Receivable Turnover

Graph 4 Accounts Receivable Turnover (2007 - 2011)

The receivable turnover ratio indicates the velocity of a company's debt collection, the number of times average receivables are turned over during a year. This ratio determines how quickly a company collects outstanding cash balances from its customers during an accounting period. It is an important indicator of a company's financial and operational performance and can be used to determine if a company is having difficulties collecting sales made on credit. (Ready Ratio, 2011) Calculation (formula): Receivables turnover ratio = Net receivable sales/ Average accounts receivables There is no general norm for the receivables turnover ratio; it strongly depends on the industry and other factors. The higher the value of receivable turnover the more efficient is the management of debtors or more liquid the debtors are, the better the company is in terms of collecting their accounts receivables. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. But in some cases too high ratio can indicate that the company's credit lending policies are too stringent, preventing prime borrowing candidates from becoming customers. (Ready Ratio, 2011) For Double A Public Company, the receivable turnover ratio seems to be on rise as of 2011 which is a good indication for the firms financial stand. This demonstrates that the firm is efficiently managing the debtors.

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Financial Analysis Report: Double A

Avg Collection Period (days)


35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2007 2008 2009 2010 2011 Avg Collection Period (days)

Graph 5 Average Collection Period (2007 2012)

Average Collection Period represents the average number of days it takes the company to convert receivables into cash. Average Collection Period formula is: Avg. collection Period = 365/Accounts receivable Turnover Average collection period measures the average number of days that accounts receivable are outstanding. This activity ratio should be the same or lower than the company's credit terms. As a rule, outstanding receivables should not exceed credit terms by more than 10-15 days. This ratio takes in consideration only the credit sales. If the cash sales are included, the ratio will be affected and may lose its significance. It is best to use average accounts receivable to avoid seasonality effects. For the Double A Public Company, the collection period is just above the industry average of 30 days. But if it continues to rise then the company will face problem in accumulating cash to pay up the expenses. Fixed and Total Asset Turnover The fixed asset turnover ratio measures the company's effectiveness in generating sales from its investments in plant, property, and equipment. If the fixed asset turnover ratio is low as compared to the industry or past years of data for the firm, it means that sales are low or the investment in plant and equipment is too high. If the fixed asset turnover ratio is too high, then the business firm is likely operating over capacity and needs to either increase its asset base (plant, property, equipment) to support its sales or reduce its capacity.
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Financial Analysis Report: Double A

In 2007 Fixed Asset Turnover Ratio was 1.086 which reduced to .984 due to decrease in the net sales in 2008. In 2009 it was again close to 1. But it was because a decrease in the both net sales and firms fixed asset. After that net sales started to decrease and firms fixed asset started to increase resulting in a decrease in the fixed turnover ratio which was 0. 667 in 2011, a very low figure indeed compared to previous data of the company. The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. A higher total asset turnover ratio is more favourable than a lower one. Companies that see continual increases in turnover ratio are improving how efficiently managers use the companys assets to generate revenue. Companies with a declining asset turnover ratio must analyse their financial statements to understand the reason for the decline. For example, a decline in total asset turnover ratio might result from an increase in fixed assets or a decline or slow increase in revenue. That is evident from the Graph and graph. In 2007 net sales was 23,333 million baht. But after that it started to decrease and in 2011 it was only 18,317 million baht. In comparison to that the total asset was increasing during the period. In 2007 it was 28,563 million baht and in 2011 it was 33,802 baht. So from the discussion above we can say that the firms total asset turnover was decreasing starting from 0.817 in 2007 to 0.542 in 2011.

Asset Turnover Ratio


1.200 1.000 0.800 0.600 0.400 0.200 0.000 2007 2008 2009 2010 2011 Total Asset Turnover (times) Fixed Turnover Ratio

Graph 6 Asset Turnover ratio (2007 - 2011)

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Financial Analysis Report: Double A

Debt Management Ratio


Financial leverage ratios (debt ratios) measure the ability of a company to meet its financial obligations when they fall due. Financial leverage ratios (debt ratios) indicate the ability of a company to repay principal amount of its debts, pay interest on its borrowings, and to meet its other financial obligations. They also give insights into the mix of equity and debt a company is using. (Ready Ratio, 2011)Financial leverage ratios usually compare the debts of a company to its assets. The common examples of financial leverage ratios include debt ratio, interest coverage ratio, capitalization ratio, debt-to-equity ratio, and fixed assets to net worth ratio. Debt Ratio

Debt Ratio
80.00% 60.00% 40.00% 20.00% 0.00% 2007 2008 2009 2010 2011 Debt Ratio
Industry Avg: 50%

Graph 7 Debt Ratio (2007 - 2011)

Debt ratio is a ratio that indicates proportion between company's debt and its total assets. It shows how much the company relies on debt to finance assets. The debt ratio gives a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The higher the ratio, the greater risk will be associated with the firm's operation. A low percentage means that the company is less dependent on leverage. The lower the percentage, the less leverage a company is using and the stronger its equity position. In 2011 total assets increased by THB 6,376 million from the previous year due to the increase in non- current assets of THB 6,376 million, which composed of the increase in evaluation of property, plant and equipment of THB 5,136 million, the increase of investment in subsidiaries of THB 1,110 million, the decrease of current asset of 354 million and some others. From the graph we can see that the debt ratio was approximately equal to 50 % in the year 2007, 2008 and 2009. But in 2010 and 2011 this ratio grew to around 60 % which means
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Financial Analysis Report: Double A

the greater risk is associated with the firm's operation in these years compared to previous years. Debt Equity Ratio

Debt Equity Ratio (times)


2

1.5
1 0.5 Debt Equity Ratio (times)

0
2007 2008 2009 2010 2011

Graph 8 Debt Equity Ratio (2007 - 2011)

The debt-to-equity ratio measures the relative proportion of equity and debt used to finance a companys assets. A high ratio typically would demonstrate that the company has aggressively financed its growth through debt. The ratio also indicates the extent to which shareholders equity can fulfil the companys obligations to creditors if liquidated. In 2011 total liabilities increased by THB 3,382 million due to the increase of short term loan for investing in subsidiaries and for long term repayment. But the equity did not increase in proportion to that resulting in a decrease of the ratio 1.59 to 1.49 in 2011. Shareholders Equity increased THB 2,993 million due to the appraisal surplus which increased by THB 3,227 million and the Investments in subsidiary decreased. Another reason was due to the loss from the operation. From the graph we can see that the debt-to-equity ratio varies within 0.9 to 1.60 over the period of 2007 - 2011. Since the ratio is greater than or almost close 1 during the period the so majority of the companys assets are financed through debt.

Profitability
Profitability ratios measure a companys ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of a company to generate earnings, profits and cash flows relative to relative to some metric, often the amount of money invested. They highlight how effectively the profitability of a company is being managed. Common examples of
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Financial Analysis Report: Double A

profitability ratios include return on sales, return on investment, return on equity, return on capital employed (ROCE), cash return on capital invested (CROCI), gross profit margin and net profit margin. All of these ratios indicate how well a company is performing at generating profits or revenues relative to a certain metric. Gross Profit, Net Profit and Operating Profit Margin

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2007 2008 2009 2010 2011 Gross Profit Margin Operating Profit Margin Net Profit Margin

Graph 9 Profit Margin (2007)

Gross profit is the percentage by which gross profits exceed production costs. Gross margins reveal how much a company earns taking into consideration the costs that it incurs for producing its products or services. Gross margin is a good indication of how profi Graph a company is at the most fundamental level, how efficiently a company uses its resources, materials, and labour. It is usually expressed as a percentage, and indicates the profitability of a business before overhead costs; it is a measure of how well a company controls its costs. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations, the better the company is thought to control costs. Investors use the gross profit margin to compare companies in the same industry and also in different industries to determine what are the most profi Graph. (Ready Ratio, 2011) A company that boasts a higher gross margin than its competitors and industry is more efficient. Calculation (formula) Gross profit margin = Gross profit / Revenue

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Financial Analysis Report: Double A

If we observe the above graph, we will notice that Double A Gross profit has been declining since 2009 indicating that the company control over cost is inadequate. Net profit margin (or profit margin, net margin, return on revenue) is a ratio of profitability calculated as after-tax net income (net profits) divided by sales (revenue). Net profit margin is displayed as a percentage. It shows the amount of each sales dollar left over after all expenses have been paid.Net profit margin is a key ratio of profitability. It is very useful when comparing companies in similar industries. A higher net profit margin means that a company is more efficient at converting sales into actual profit. Calculation (formula) Net profit margin = Profit (after tax) / Revenue The Companys net profit was following a declining pattern since 2009 and in 2011 the net profit indicates the company is suffering loss which is very undesirable for the company as well as the shareholders. Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. Hence, the higher the margin the better it is for the company. Operating Expense Ratio

Operating Expense Ratio


15.00% 10.00% 5.00% 0.00% 2007 2008 2009 2010 2011 Operating Expense Ratio

Graph 10 Operating Expense Ratio (2007 -2011)

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Financial Analysis Report: Double A

Operating expense ratio can be explained as a way of quantifying the cost of operating a piece of property compared to the income brought in by that property. As explained by Investopedia, the operating expense ratio (OER) is a helpful tool in carrying out the comparisons between the expenses of analogous properties. If a particular property piece features a high OER, an investor should take it as a warning signal and look into the matter for why is the OER high. The formula for OER is, Operating Expense Ratio = Operating Expenses / Effective Gross Income The importance of operating expense ratio lies in the fact of it being an indicator of the efficiency level of managing a property. A lower operating expense ratio indicates a greater profit for the investors. in simple words, the operating expense ratio reflects the percentage of a propertys income which is being utilized to pay operational and maintenance expenses. Moreover, the operating expense ratio also represents individual operating expenses items in the form of a percentage of the effective gross income and is also helpful in identifying potential problems. For Double A the OER is above industry average of 10% which quit good for the company. Return on Assets

Return On Assets
8.00% 6.00% 4.00% 2.00% 0.00% 2007 2008 2009 2010 2011 Return On Assets

Graph 11 Return on Assets (2007 - 2011)

The return on average assets is useful in measuring profits against the assets used by a company for generating profits. The ratio is an important indicator of the intensity of assets of a company. A lower ROA ratio reflects a higher asset-intensity of the company, and vice versa. Besides, a more asset-intensive company requires a larger amount of money to continue producing revenue.
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Financial Analysis Report: Double A

Moreover, the return on average assets ratio is also useful for investors in assessing the financial strength and efficiency of a company for using its resources. It is also imperative for the management to determine the performance of a company against its planned business goals, or market competitors. From the above graph, we can deduce that ROA of the company is not looking too healthy especially after 2009 and rapid fall on 2011 indicates that the company is in loss. Return on Equity

Return on equity
16.00%
14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2007 2008 2009 2010 2011 Return on equity

Graph 12 Return on Equity (2007 - 2011)

Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that year. It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity. From the graph we can see that the ROE was quite low in the year 2007 and 2008. In 2009 it reached 14.90 % which was the highest during the period of 2007-2011. After that it again started to gone down with 10.72% in 2010. But in 2011 this figure decreased significantly and became 1.13 % which was the lowest during the period due to the decrease in financial performance. Earnings and Dividend per share The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.

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Financial Analysis Report: Double A

Earnings per share (EPS) are the portion of the companys distribu Graph profit which is allocated to each outstanding equity share (common share). Earnings per share are a very good indicator of the profitability of any organization, and it is one of the most widely used measures of profitability. It should be noted that two different companies could generate the same EPS but one could do so with a lesser equity. All other things being equal, this company is better than the other one because it is more efficient at using its capital for generating profits. It is important that the investors do not rely on only measure of earnings per share for making investment decisions. Instead they should use in conjunction with other measures and financial statement analysis.

12 10 8 6 4 2 0 2007 2008 2009 2010 2011 Earnings Per Share (Bath) Dividend Per share

Graph 13 Dividend and Earnings per share (2007 - 2012)

Market Value
Market value refers to the price at which an asset is traded in the competitive auction setting. The apt definition for market value is the current quoted price at which a share of common stock or a bond is bought or sold by the investors at a specific time. The market value is, sometimes, also referred as total market value. the market value, in context of securities is quite different from the book value for it takes into consideration the future growth potential. Usually, the market value of a real property, like land, or a home is determined by professional appraisers or real estate agents o the basis of a various key factors. Especially in chaotic markets, the market value can fluctuate spectacularly. Dividend Payout and Retention Ratio Dividend policy ratios measure how much a company pays out in dividends relative to its earnings and market value of its shares. These ratios provide insights into the dividend policy of a company. They compare the dividends to the earnings to measure how much of its
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Financial Analysis Report: Double A

earnings a company is paying out in dividends. They also compare the dividends to share prices to see how much cash flow the investors get for their investments in the companys shares. Generally speaking, the investors usually look for high dividend policy ratios therefore the companies should manage their dividend policies carefully. Companies need to manage their dividend policy ratios carefully to maximize the shareholder value. Market value of shares is greatly affected by the dividend policy ratios. Poor dividend policy ratios can result in fall of market value of shares and thus loss of shareholder value. On the other hand good dividend policy ratios can increase the prices of shares and shareholder value. Unfortunately, for Double A, the dividend payout ratio is extremely low in 2011and hence will have adverse effect on the market value of the share. Retention Ratio indicates the percentage of a company's earnings that are not paid out in dividends but credited to retained earnings. It is the opposite of the dividend payout ratio, so that also called the retention rate. Retention Ratio = 1 - Dividend Payout Ratio = Retained Earnings / Net Income The payout ratio is the amount of dividends the company pays out divided by the net income. This formula can be rearranged to show that the retention ratio plus payout ratio equals 1, or essentially 100%. That is to say that the amount paid out in dividends plus the amount kept by the company comprises all of net income.

90% 80% 70%

60%
50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 Dividend Payout Ratio Retention ratio

Graph 14 Dividend Payout Ratio (2007 - 2011)

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Financial Analysis Report: Double A

Book value per share is just one of the methods for comparison in valuing of a company. Enterprise value, or firm value, market value, market capitalization, and other methods may be used in different circumstances or compared to one another for contrast. For example, enterprise value would look at the market value of the company's equity plus its debt, whereas book value per share only looks at the equity on the balance sheet. Conceptually, book value per share is similar to net worth, meaning it is assets minus debt, and may be looked at as though what would occur if operations were to cease. One must consider that the balance sheet may not reflect with certain accuracy, what would actually occur if a company did sell all of their assets. The book value of the shares for Double has been good over the 5 years period. This is a favourable sign for the financial condition of the company.

Book value per share (bath)


30 25 20 15 10 5 0 2007 2008 2009 2010 2011 Book value per share (bath)

Graph 15 Book Value per share (2007 - 2011)

Dividend Yield Dividend yield is the amount that a company pays to its share holders annually for their investments. It is expressed as a percentage and indicates attractiveness of investing in a companys stocks. Dividend yield is considered as ROI for income investors who are not interested in capital gains or long-term earnings. It is calculated as Annual Dividend Per Share divided by Current Market Value Per Share. Calculation (formula) Dividend Yield Ratio = Dividend per Share / Market Value per Share Market value of shares affect dividend yield ratio. Owners/Directors of the company may leak out some fake information to play with the market value of shares. Once the market
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Financial Analysis Report: Double A

value of share fluctuates, dividend yield ratio gets adjusted accordingly. Dividend yield ratio is useless for companies that do not pay dividends to share holders. This may include a group that has several technology stocks etc. In 2007, the dividend yield of the company was very high, but it rapidly drops throughout the following year and drop down to 1%.

Dividend Yield
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2007 2008 2009 2010 2011

Dividend Yield

Graph 16 Dividend Yield (2007 - 2011)

Recommendation
The Companys net liquid position has gradually declined over the years. This indicates that company is not maintaining sufficient liquidity. Company should focus more on reducing current liabilities but paying of some of the liabilities and cutting operating cost. The lower the operating efficiency ratio the better since it indicates that the firm is generating enough revenue to cover the expenses. To further improve its efficiency, Double A management needs to adopt a cost control strategy. In short Double A needs to decrease its operating expense more and at the same time improve gross income. The volatility in the ratio needs to be stabilized. Its market price of share is decreasing and the firm should try to increase the price by efficient management and thereby increasing the operating profits and hence the shareholders confidence will be regained.

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Financial Analysis Report: Double A

Double As market-book ratio has been quite inconsistent over the years, this points that there have been some fluctuations in the value of the share. It also indicates that the falling market price of the shares is causing the ratio to deteriorate over time. The bank needs to improve its market to book ratio by increasing its market price of stock by adopting measures which will increase the shareholders confidence. Double As is incurring high debt/equity ratio over the years which indicates that the bank has been financing its growth mostly with debt. The bank therefore needs to increase its equity capital and decrease its dependency on debt. However debt capital is the cheapest source of fund and hence increasing equity capital might affect profitability.

In recent years, the firm is facing a declining ROE which is not a good sign for the firm since its shows how Double As management is deploying the shareholders' capital. In general, it's considered a sign of good management when a company's performance over time is at least as good; this can be found from ROA since this ratio helps to measure the profit and efficiency of the firm. A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. To increase the value of ROE, firm can reduce the value of the shareholders' equity. Thus, write-downs and share buybacks can artificially also boost ROE. Likewise, a high level of debt can artificially boost ROE; after all, the more debt a firm has the fewer shareholders equity it has as a percentage of total assets, and the higher its ROE is for the firm. A declining return on assets usually leads to a fall in the stock price as investors become aware that earnings of the firm is going down .Hence existing and potential lose motivation to invest into Double As share. Therefore, Double A needs to increase its efficiency on tax management, expense management and asset management. Even though Double As dividend per share ratio is gradually decreasing over the years. It may not mean that the firm is performing poorly or is unprofitable. Firm may reinvest by accumulating funds from giving low dividends. By reinvesting the firm may be able to provide higher dividends in the long run. Thus investors need to consider a number of issues before coming to a decision.

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Financial Analysis Report: Double A

Conclusion
Since its establishment, Double A company were able to make name for themselves as a leading paper manufacturer by providing high quality paper and services. Despite their strong market position, the firms financial position in the current years has not been healthy. One of the key reasons is the Global recession that hit the business industry in 2008 and the adverse affect of this recession on the firms financial performance can be noted in the ratio analysis. Since 2008 the company revenue gradually declined and on top of that the company invested a lot of money on acquiring fixed and current assets for future development. In addition to that the company must focus their attention to the growing concern over environments and the world going paper less day by day. The firms should allocate more resources towards research and development and cut down operating cost and other expenses in order to improve the current financial condition. Despite all the challenges, Double A is a still financially sound company as the demand for quality paper is ever growing. Moreover the firm brand name has significant effect on the market making them one of the leaders in the paper manufacturing industry. So to conclude, Double A should focus on improving the current financial status by increasing sales and by cutting cost which will result in increased market share value. This will consequently improve the confidence of the shareholders as well as the investment future.

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Financial Analysis Report: Double A

Bibliography
Double A (1991) Public Companay Limited. (2011). Annual Report 2010.

Double A (1991) Public Company Limited. (2012, 12 01). Environment Care Mission. Retrieved 12 13, 2012, from www.corp.doubleapaper.com: http://corp.doubleapaper.com/en/profile.asp Ready Ratio. (2011, 12 13). Ready Ratios. Retrieved 12 12, 2012, from www.readyratios.com: http://www.readyratios.com/reference/liquidity/acid_test_ratio.html "Debt/Equity Ratio: Definition from Answers.com." Answers.com: Wiki Q&A combined with free online dictionary, thesaurus, and encyclopedias. <http://www.answers.com/topic/debt-equity-ratio>. Vault cash financial definition of Vault cash. Vault cash finance term by the Free Online Dictionary." Financial Dictionary. <http://financial-dictionary.thefreedictionary.com/Vault+cash Answers.com: Wiki Q&A combined with free online dictionary, thesaurus, and encyclopedias. <http://www.answers.com>.

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