Task D:

a. In the annual report to the shareholders, the CEO of DDF Inc wrote, “2014 was a good year for the
firm with respect to our ability to meet our short-term obligations”. Analyse this statement.
The CEO of DDF Inc's statement "2014 was a good year for the firm with respect ur ability to meet our
short-term obligations", I think it is very exact. Now, I will give some reason to explain why 2014 was a
good year for the company. Firstly, we can see that in 2014,the long-term debt ratio is lowest among
three years (2014, 2015. 2016) at 0.35 and is the best ratio DDF achieved in three years. Although,the
average ratio of 2016 was 0.35, it means that this average number for 2014 is approximately 0.35 as
well. Therefore, DD controlled its long-term debt quite good and did not exceed the industry's ratio in
2014. Secondly, that is the quick ratio and current ratio. Both of them in 2014 were over 1. They show
that the ability of DDF to cover short-term obligations with its current assets because the total assets
with high liquidity was able to recoup the short-term liabilities.

In addition to, day's sale in receivables ratio in 2014 was the best ratio as compared to this ratio in 2015,
2016 and the industry average. The low day's sales in receivables was 94. It means that DDF sold
inventory and received the payback from customer in short time than in 2015 and 2016. It helps DDF to
reduce account receivables and collect money reinvestment.

Moreover, in 2014, total asset turnover was 0.7. It was the higher than the industry average of 2016
(0.4). It means that DDF can create cash from its assets quickly and shows good liquidity of the
company. We can see that DDF used asset turnover effectively to enhance the profitability of DDF

Besides, we can see that the inventory turnover ratio was also the lowest number among three years at
32.25. The industry average inventory turnover was up to 53.25 in 2016 and its means that this average
number in 2014 had been aroung 53.25 as well. DDF was doing well in selling its services and can
generate money quite fast to make money to pay om the debts and re-invest the profits.

In short, the ratios analysed above show strong ability of DDF to pay off both long-term and short-term
debts from fast moving inventory and current assets, the time interest earned ratio in 2014 was the best
one in three years. The lowest time interest earned ratio means that DDF earned profits to cover the
interest of liabilities more quickly in 2014 than it did in 2015 and 2016

b.

+ Long-term debt

The long term debt to total assets ratio is a measurement representing the percentage of a
corporation's assets financed with loans or other financial obligations lasting more than one year.
The ratio provides a general measure of the long-term financial position of a company, including
its ability to meet financial requirements for outstanding loans.

Long-term debt ratio = total liabilities/ Total Assets

We can see that, the long-term debt ratio of DDF increased from 0.35 in 2014 to 0.45 in 2016. It
means that DDF had much non-current debt to pay off in 2016 than in 2014. This ratio also means
DDF is creating capital for investment to the industry from non-current liabilities. This ratio in
2016 was higher than the industry average ratio. It brought some risks for the company because if
they cannot pay off debts, they must pay the interest from debts as well while other companies in
the industry can do better than DDF to make many profits to cover debts.

+ Inventory turnover

The inventory turnover ratio is the average time that items of stock are standing in the warehouse.
It also is a key measure for evaluating just how efficient management is at managing company
inventory and generating sales from it.

Inventory turnover ratio = COGS/Average Inventory

The inventory turnover ratio in 2014 was lowest (32.25) and increased in 2015 and 2016. In 2016,
the inventory turnover ratio also was higher than the industry average (62.65 compared with
53.25). They mean DDF had much slow trade in this industry and it affected company's revenue
and reputation in its industry. It can lead to the difficulty in borrowing loans and attracting
investment.

+ Depreciation/Total Assets

The accumulated depreciation to fixed assets ratio allows analysts to understand if new assets are
being deployed by the company. An increase to the company's accumulated depreciation to fixed
assets ratio can indicate management is struggling to find the cash necessary to make new
investments.

This ratio in 2014(0.018) was lower than this ratio in 2015 and 2016. The depreciation/ Total assets
in 2016 also was higher than the industry average (0.25 > 0.015). It means in 2016, DDF faced
difficult to find the cash necessary to make new investments

+ Days’ sales in receivables ratio

Days’ sales in receivables ratio is the average length of time that a company takes for debtors to
repay and this figure is better small for a company.

The day sales receivables have also risen from 94 in 2014 to 98 in 2015 and 113 in 2016. It shows
DDF's debtors can pay off the debts later than previous year, especially in 2016 they can increase
to 19 days compared with 2014. Therefore, the increase in this ratio is not good for DDF. However,
the ratio in 2016 is lower than industry average at 130.25. It shows that other companies in this
industry will collect back the payments for account receivables even slower than DDF.

+ Debt to equity ratio

Debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total
equity.

Debt to equity ratio = total liabilities/ total equity

The debt to equity ratio was declined from 0.9 in 2014 to 0.75 in 2016. It is a good sign for DDF
because it had less non-current liabilities to recover in 2016 compared with 2014 and 2015. It
proves that the DDF has controlled the liabilities quite good as this ratio seems to decrease year
by year. The company created more equity from shareholders rather than from bank loans, so it
can decrease interest enhance the shareholders' capital. The debt to equity in 2016 is lower than
the industry average. It means that DDF has stable financial position and can balance from debt
and equity in this industry to avoid risks of equity cannot cover debts.

+ Profit Margin

The profit margin ratio is also called gross profit ratio, is a profitability rato that measures the
amount of net income earned with each pound of sales generated by comparing the net income and
the net sales of a company.

The profit margin ratio=net income/net sales

The profit margin ratio of DDF increased gradually from 0.06 in 2014 to 0.07 in 2015 and 0.082
in 2016. It shows that DDF earned more profit in 2016 than in 2014 and 2015. This ratio in 2016
was higher than the industry average in 2016. DDF was doing well in selling and earning revenue.
However, the selling price of DDF may be higher than other firms in the industry and DDF should
adjust the selling price to atractt consumers.
+ Total assets turnover

total assets turnover ratio is the ratio of the value of a company’s sales or revenues generated
relative to the value of its assets.

Assets turnover ratio = Sales or Revenue / Total Assets

The Assets turnover ratio declined from 0.7 in 2014 to 0.65 in 2015 and go down to 0.54 in 2016.
However, this ratio in ration was higher than the industry average(0.4). It means that DDF had
lower sale revenue in 2016 than last years' revenues and has been doing worse to make profit.
Lower asset turn over means the company can be adjusted to lower down the selling price to
increase customer demand

+ Quick ratio

Quick Ratio is the ratio indicating the liquidity position of a company. I this ratio is more than 1,
It will better

QR= Current Assets-stock/ Current Liabilities

The Quick Ratio in 2014 was 1.029 and in 2015 was 1.03. This ratio in 2016 is 1.028. All of them
were higher than 1. It shows DDF can pay off the short-term debts using its current assets. This
ratio in 2016 was lower than the average of the industry but the variance was not too high. DDF
was doing well in this industry to solve current liabilities and its ratio was still in the safe limitation
of the industry with not faced risky.

+ Current ratio

Current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term
obligation

Current ratio = current assets/current liabilities

The current ratio of DDF in 2014 was 1.15 and increased to 1.21 in 2015 and 1.33 in 2016. All of
them were more than 1. It means that DDF had faster in 2016 than 2014 and 2015 and they were
doing well to cover the debts .This ratio in 2016 was higher than the industry average ratio( 1.33
compared 1.25). It shows that DDF is still doing wel in the industry with quite high liquidity
situation as compared to other firms's liquidity.