Question

Prepare ratio analyses (for the three year time period). You will compute the following ratios:

• Profitability ratios:
  • Gross Profit margin
  • Operating expense margin
  • Profit margin
  • Return on assets
  • Return on equity

• Productivity ratios:
  • Accounts Receivable Turnover
  • Days Sales Outstanding
  • Inventory Turnover
  • Days inventory outstanding
  • Accounts Payable turnover
  • Days payable outstanding
  • Cash Conversion Cycle
  • PPE Turnover

• Coverage ratios:
  • Total liabilities-to-equity
  • Total debt to equity
  • Cash from operations to total debt
  • Times interest earned

• Liquidity ratios:
  • Current Ratio
  • Quick Ratio

Answer 1

Please note that for 2015 certain ratios likes accounts receivable/inventory turnover ratio could not be calculated as opening balance were not provided.

gross profit margin	gross profit / sales
	2017 (000)	2016 (000)	2015 (000)
gross profit	4092904	3693052	3363126
sales	14134732	12866757	11939999
ratio	28.96%	28.70%	28.17%
operating expense margin	operating expenses / operating income
	2017 (000)	2016 (000)	2015 (000)
operating expenses (S,G&A expenses)	2043698	1890408	1738755
operating income:
net income	1362753	1117654	1020661
add:tax	677967	668502	591098
add:interest expense	7676	16488	12612
total operating income	2048396	1802644	1624371
ratio	99.77%	104.87%	107.04%
profit margin	net income / sales
	2017 (000)	2016 (000)	2015 (000)
net income	1362753	1117654	1020661
sales	14134732	12866757	11939999
ratio	9.64%	8.69%	8.55%
return on assets	net income / avg. total assets
	2017 (000)	2016 (000)	2015 (000)
net income	1362753	1117654	1020661
opening assets	5309351	4869119
closing assets	5722051	5309351	4869119
avg.assets	5515701	5089235
ratio	24.71%	21.96%
return on equity	net income / avg. shareholders equity
	2017 (000)	2016 (000)	2015 (000)
net income	1362753	1117654	1020661
opening shareholders equity	2748017	2471991
closing shareholders equity	3049308	2748017	2471991
avg.shareholders equity	2898663	2610004
ratio	47.01%	42.82%
accounts receivable turnover	sales / avg. accounts receivable
	2017 (000)	2016 (000)	2015 (000)
sales	14134732	12866757	11939999
opening accounts receivable	75154	73627
closing accountes receivable	87868	75154	73627
avg.accounts receivable	81511	74390.5
ratio	173.41	172.96
days sales outstanding	365 days / accounts receivable turnover
	2017	2016	2015
accounts receivable turnover	173.41	172.96
ratio (in days)	2	2
inventory turnover	cost of goods sold / avg.inventory
	2017 (000)	2016 (000)	2015 (000)
cost of goods sold	10042638	9173705	8576873
opening inventory	1512886	1419104
closing inventory	1641735	1512886	1419104
avg.inventories	1577311	1465995
ratio	6.37	6.26
days inventory outstanding	365 days / inventory turnover ratio
	2017	2016	2015
inventory turnover ratio	6.37	6.26
ratio (in days)	57	58
accounts payable turnover	purchases / avg.accounts payable
purchases	ending inventory - beginning inventory + cost of goods sold
	2017 (000)	2016 (000)	2015 (000)
closing inventory	1641735	1512886	1419104
opening inventory	-1512886	-1419104
cost of goods sold	10042638	9173705	8576873
purchases	10171487	9267487
opening accounts payable	1021735	945559
closing accounts payable	1059844	1021735	945559
avg.accounts payable	1040790	983647
ratio	9.77	9.42
days payable outstanding	365 days / accounts payable turnover ratio
	2017	2016	2015
accounts payable turnover	9.77	9.42
ratio (in days)	37	39
cash conversion cycle	days sales outstanding + days of inventory on hand - number of days payable
	2017	2016	2015
days inventory outstanding	57	58
days sales outstanding	2	2
number of days payable	-37	-39
ratio	22	21
PPE turnover	net sales / avg.fixed assets
	2017 (000)	2016 (000)	2015 (000)
sales	14134732	12866757	11939999
opening fixed assets	2328048	2342906
closing fixed assets	2382464	2328048	2342906
avg.fixed assets	2355256	2335477
ratio	6.00	5.51