Ratio and Performance Analysis of Company X

Running head: FINANCIAL MARKETS
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1FINANCIAL MARKETS
Table of Contents
a) Ratio and performance analysis of Company X:................................................................2
b) Par value and market value for 2015, 2016 and 2017:.....................................................15
c) Comparison of ratio performance with Company Y and Industry:..................................16
References:...............................................................................................................................19

2FINANCIAL MARKETS
a) Ratio and performance analysis of Company X:
The detailed ratio as well as performance analysis of the company has been provided
below:
Ratios 2017 2016 2015 2014 2013
Liquidity Ratios:
Current ratio 1.07 1.00 1.06 1.06 1.05
Quick ratio 0.85 0.63 0.83 0.61 0.62
Accounts Receivable to Working capital 3.18 3.49 4.08 4.10 4.28
Inventory to Working Capital 0.30 0.32 0.38 0.35 0.38
Sales to Working capital 20.70 20.89 -1.64 1.54 29.97
Long-Term Liabilities to Working Capital 9.54 10.76 12.82 11.29 12.29
Activity ratios:
Accounts Receivable Turnover 6.50 5.98 6.03 7.20 7.00
Days Sales in Receivables 56.14 61.06 60.52 50.73 52.11
Inventory Turnover 32.21 33.03 37.24 52.26 48.39
Days Cost of Sales in Inventory 11.33 11.05 9.80 6.98 7.54

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Operating Cycle Days 67.47 72.11 70.32 57.71 59.66
Sales to Assets 0.71 0.65 0.66 0.82 0.76
Sales to Net Fixed Assets 2.19 2.01 2.03 2.54 2.35
Profitability ratios:
Percent Gross Profit 53.00 49.00 43.00 38.00 38.00
Percent Profit Margin on Sales 6.03 6.50 3.03 -2.05 -8.60
Percent Rate of Return on Assets 4.27 4.23 1.99 -1.68 -6.57
Price Earning Ratio 0.16 0.16 0.16 0.19 0.19
Earnings Per Share 23.96 24.06 23.92 20.24 20.09
Coverage ratios
Debt To Total Assets 0.79 0.80 0.81 0.78 0.78

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Percent Owners' Equity 21.34 20.15 19.02 21.73 21.85
Equity Multiplier 4.69 4.96 5.26 4.60 4.58
Debt to Equity 3.69 3.96 4.26 3.60 3.58
Book Value Per Share 6.50 6.07 5.62 5.62 5.62
Each of these ratios have been carefully analysed in details below and the most
important ones have been graphically explained.
1. Liquidity Ratios:
 Current Ratio: The current ratio is one of the most important
liquidity ratios of any organisation. This ratio reflects the financial
strength of any company (Delen, Kuzey and Uyar 2013). It says the
number of times the current assets exceeds the current liabilities of
the company. A higher number is needed in this case, as it reflects
a company’s power to pay off its short term obligations.
In Company’s X current ratio, over the five year period, it has remained relatively 1.0, thus it
states that the company has remained healthy in this front and has been able to meet its short
term obligations. The five year period’s current ratio has been graphically showed below (Fig
1), where it shows that the average has remained very healthy.

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2017 2016 2015 2014 2013
0.96
0.98
1.00
1.02
1.04
1.06
1.08
1.10
Current ratio
(Fig 1)
 Quick ratio: This ratio is also called the acid test ratio and it helps
to understand the number of times the liquid assets of the company
are able to cover the short term obligations of the company.
In case of Company X, it can be seen that the quick ratio of the company has improved over
the years, and it currently stands at 0.85, which shows that the ability to honour short term
obligations is good.
 Inventory to Working Capital: This ratio measures the
overdependence of the working capital of the company on the stock
of inventory (Lartey, Antwi and Boadi, 2013). It is better that this
ratio remains low as it states that the company has a decent level of
working capital and the fact that it is not dependent on the level of
inventory of the company. The figure of the ratio is stated below: