Question

what info does those financial ratios show? comparing ROE ROA current ratio

ROA 10.5 7.55 4.84 3.29 2.14 0.56 2016 2017 2018 -2.36 -6.62 Air Asia X Cebu Asiana Airlines

Answer 1

ROE = Return on Equity = Net Profit / Equity Capital

This ratio shows how well company is utilizing their equity funds. How much profit they are making from equity .

ROA = Return on Assets = Net Profit / Total Assets

This ratio shows how well company is utilizing their total assets (Current Assets + Fixed Assets). How much profit they are making on their total assets .

Current Ratio = Current Assets / Current Liabilities

Current ratio measure the company’s financial health and liquidity position in short term. It defines how likely a company is able to pay off debts.

Explanation :

In graphs we can see, Air Asia X and Cebu are continuously showing disappointing performance YoY and that's why ROA and ROE are declining or turning negative. Liquidity position is for all three companies and that's why their Current ratio is less than 1. Asiana Airlines has worst current ratio however they tried to manage it in 2017 which also helped them in getting higher ROE and ROA.

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