Pocktech Company Case Study
Autor: Rachel • February 6, 2018 • 7,341 Words (30 Pages) • 778 Views
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Financial ratio analysis
[pic 11]
January 15, 2013
Balance Sheet:
Cash and cash equivalent
142,410,000
Accounts receivables, net
124,230,000
Inventories
13,770,000
Total current assets
498,720,000
Total assets
1,063,560,000
Total current liabilities
424,080,000
Long-term debt
15,150,000
Total liabilities
501,900,000
Income statement:
Net revenue
1,486,200,000
Gross income (margin)
280,500,000
Operating income (margin)
124,020,000
Net income (margin)
87,690,000
Statement of Cash Flows
Net cash from operating activities
159,300,000
Net cash used in investing activities
(69,510,000)
Effect of exchange rate changes
16,950,000
Beginning cash position
129,510,000
Ending cash position
142,410,000
To evaluate the healthiness of a firm’s financial situation, we use the followings four types of financial ratios, which are showed below:
Table 5: Results summary of PockTech’s financial ratios
Category
Financial Ratios
Result
Industry
A. Debt Management
Debt ratio
47.2%
49%
Times-interest-earned ratio
259.5
150
B. Liquidity
Current ratio
1.18
1.01
Quick ratio
1.14
1.0
C. Asset Management
Inventory turnover
87.56
50.2
Day's sales outstanding
30.51
34
Total asset turnover
1.40
0.9
D. Profitability
Profit margin
5.90%
4.9%
Gross margin
18.9%
12%
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Debt management:
Debt Ratio:[pic 12]
Debt Ratio=[pic 13]
==47.2%[pic 14]
We get 47.2% from debt ratio, which is a good situation for the company to some extent. As the lower ratio means a greater cushion for investors’ loss if the company is liquidated, the small value of 47.2% is acceptable for our new firm.
Time-interest-earned ratio:
[pic 15]
Time-interest-earned
=[pic 16]
= =259.5[pic 17]
Because the time-interest-earned ratio is a way to evaluate a company’s earnings decline before it cannot pay the interest costs, a higher one stands a better situation. For our company, the ratio is 259.5, so we have enough cash to cover the interest costs during the period.
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Liquidity:
Current Ratio:[pic 18]
Current Ratio=[pic 19]
==1.18 [pic 20]
In general, the current ratio between 1 and 2 is a good financial situation. As the current ratio for our firm is 1.18, we can say that our company is able to pay current liabilities by its current assets. In this way, short-term investors might be preferred to invest our company due to the current situation.
Quick Ratio:[pic 21]
Quick Ratio= [pic 22]
=[pic 23]
=1.14
The quick ratio measures a company’s ability to pay for its liabilities by removing inventory from assets. The value of the ratio for our firm is 1.14,
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