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3 Liquidity ratio
5 Profitability ratio
Return on invested capital: The return on invested capital measure gives a sense of
how well a company is using its money to generate returns. Comparing a company's
return on capital (ROIC) with its cost of capital (WACC) reveals whether invested
capital was used effectively.
In the above table ROAC has fallen from 20.44%
to 12.55% reveals that the company’s capital was not used effectively.
25.00%
20.44%
20.00%
5.00%
0.00%
Return on asset Return on invested capital
250
209.8
200
150
117.39 2011-2012
100 2012-2013
50
0
Return on net worth
Activity/Turnover ratio
Total activity turnover ratio: Companies will typically try to turn their production
into cash or sales as fast as possible because this will generally lead to higher revenues.
Such ratios are frequently used when performing fundamental analysis on different
companies.
Total activity turnover ratio as fallen 1.72 to 1.675 reveals that the
company this year was little bit less efficient to turn their production to cash and sales.
Inventory turnover ratio: A ratio showing how many times a company's inventory
is sold and replaced over a period. It has fallen from 5.56 to 5.238. A low turnover is
usually a bad sign because products tend to deteriorate as they sit in a warehouse.
Working capital turnover ratio: The working capital turnover ratio is used to analyse
the relationship between the money used to fund operations and the sales generated
from these operations. In the above table working capital turnover ratio has increased
from 6.53 to 7.995 the higher the working capital turnover, the better because it means
that the company is generating a lot of sales compared to the money it uses to fund the
sales.
Day’s inventory: Days in inventory (DII) is an efficiency ratio that measures the
average number of days the company holds its inventory before selling it. In the above
table it has increased from 65.64 to 70.59 so the company is taking a little bit longer
than the previous figure to turn its inventory in to cash it is holding for larger time
9 7.995
8
7 6.53
6 5.56 5.238
5
4 2011-2012
3.0682.9838
3 2012-2013
1.72 1.675
2
1
0
Total activity Invested capital Inventory turnover Working capital
turnover ratio turnover ratio ratio turnover ratio
80 70.59
70 65.64
60
50 41.84 39.71
40 2011-2012
30 2012-2013
20
10
0
Average collection period Day’s inventory
Liquidity ratio
Current ratio: A liquidity ratio that measures a company's ability to pay short-term
obligations. In the above table current ratio of bereger paints has fallen from 1.633 to
1.4583 The higher the current ratio, the more capable the company is of paying its
obligations. A ratio under 1 suggests that the company would be unable to pay off its
obligations if they came due at that point.
Acid test ratio: A stringent indicator that determines whether a firm has enough short-
term assets to cover its immediate liabilities without selling inventory. In the above
table acid test ratio has fallen from 1.0971 to .969 Companies with ratios of less than 1
cannot pay their current liabilities and should be looked at with extreme caution.
Furthermore, if the acid-test ratio is much lower than the working capital ratio, it means
current assets are highly dependent on inventory.
2
1.633
1.458
1.5
1.097
0.969
1 2011-2012
2012-2013
0.5
0
Current ratio Acid test ratio
Solvency ratio
Debt equity ratio: A measure of a company's financial leverage calculated by
dividing its total liabilities by stockholders' equity. It indicates what proportion of
equity and debt the company is using to finance its assets.
The debt equity ratio has
increased from 2.58% to 2.90% A high debt/equity ratio generally means that a
company has been aggressive in financing its growth with debt. This can result in
volatile earnings as a result of the additional interest expense.
Debt to total invested capital: Companies can finance their operations through
either debt or equity. The debt-to-capital ratio gives users an idea of a company's
financial structure, or how it is financing its operations, along with some insight into its
financial strength.
There is a slight increase from 2.586% to 2.87% The higher the debt-
to-capital ratio, the more debt the company has compared to its equity. This tells
investors whether a company is more prone to using debt financing or equity financing.
Interest coverage ratio: A ratio used to determine how easily a company can pay
interest on outstanding debt. The ratio has increased from 12.77% to 13.92% means
that the company is very healthy in regard of paying its debt. When a company's interest
coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.
16.00%
13.92%
14.00% 12.77%
12.00%
10.00%
8.00% 2011-2012
6.00%
2012-2013
4.00% 2.58% 2.90% 2.59% 2.87%
2.00%
0.00%
Debt equity ratio Debt to total invested Interest coverage ratio
capital
Profitability ratio
Gross profit ratio: It is not an exact estimate of the company's pricing strategy but it
does give a good indication of financial health. A company's gross profit margin should
be stable. It should not fluctuate much from one period to another, unless the industry
it is in has been undergoing drastic changes which will affect the costs of goods sold or
pricing policies. This year company’s gross profit ratio is 30.06%. Around 33% gross
margin means products are marked up 50% and so on.
Net profit ratio: net profits to revenues for a company or business segment - typically
expressed as a percentage – that shows how much of each dollar earned by the company
is translated into profits. There is a slight increase in the net profit ratio 6.663%to 6.93%
it varies from company to company.
25.00%
20.00%
2011-2012
15.00%
9.69% 9.32% 2012-2013
10.00% 6.66% 6.93%
5.00%
0.00%
gross profit ratio net profit ratio operating profit ratio
http://www.bergerpaints.com/id/127/Annual-Reports