The financial analysis of Kaizer includes liquidity, profitability, activity and capital structure ratios. The report provides recommendations for investors. The document type is a financial analysis report and the type of assignment is not mentioned. The subject, course code, course name, and college/university are not mentioned.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
FINANCIAL ANALYSIS1 Contents Liquidity and profitability...........................................................................................................................2 Activity and Capital Structure Ratios..........................................................................................................2 Recommendations.......................................................................................................................................3 References...................................................................................................................................................4 Appendix.....................................................................................................................................................5
FINANCIAL ANALYSIS2 Liquidity and profitability The liquidity is the capability to change the current assets in cash. Liquidity of company is calculated by current ratio, Days cash-on-hand, collection period and average payment period (Al Nimer, Warrad & Al Omari, 2015). In year 2017, current ratio of company is .80. On the other hand, in year 2018, current ratio of company is .86.A current ratio that is less than one, shows that a health care organization is not in good financial health. In year 2017, the collection period is 8.92 days. On the other hand, in year 2018, collection period is 30.39 days. Other element of liquidity is Days cash on hand. In year 2017, Days cash on hand is 6.03 days. Conversely, in year 2018, Days cash on hand 12.65 days. In 2017, average payment period is 74.12 days. On other hand, in 2018, it is 22.69 days. Further, by assessing profitability of company, the financial performance of company can be evaluated. The profitability can be measured by operating margin, total margin and return on net asset (Borio, Gambacorta & Hofmann, 2017). In year 2018, operating margin of company is 4% as same as in year 2017. In year 2017, total margin of company is 5.12%. On the other hand, in 2018, total margin is 7%. Furthermore, in 2017, return on net asset is 8%. Conversely, in 2018, return on asset is 9%. Activity and Capital Structure Ratios Activity ratios are calculated to understand the ability of the company on how well the company can convert the cash into the sales. The fixed asset turnover ratio was 1.39 in the year 2017 and the ratio increased to 1.54 in the year 2018, thereby presenting how well the fixed assets are utilized to generate the income. The current ratio of the company is 2.69 for the year
FINANCIAL ANALYSIS3 2017 and that fell down to 2.58 in the year 2018. The current ratio depicts the ability of the company to pay back the current liabilities easily. The company is performing well in the activity ratios however the capital structure includes the net financing of assets at 31% and 29% for the respective years(Uechi, et al 2015). The age of plant is 20.7 years in 2017 and 20.64 years in 2018 and the plant is going to work till 20 years approximately. The long term liabilities to capital ratio decreased from 0.12 to 0.11 reflecting the payment of the debts. The debt service ratio of the company reflects the ability to produce cash to cover the interest expenses. The ratio presents 344.87 times ability in previous year followed by 1595.12 thereby indicating the positive impact and enhanced ability of the company. The cash flow to debt ratio however determines the time taken by the company to pay all the debts and in terms of percentage the company is able to pay 8% debts as compared to the previous year which was 7% (Chadha & Sharma, 2015). Recommendations From the above analysis it can be concluded that debt has been reduced, the payment capacity has increased and the cash is also converting at the greater speed and hence the company is opportunist from the point of view of investors.As per evaluation of profitability of company, operating margin, total margin and return on asset is increasing in year 2018. It means that company is doing well and should maintain the same in upcoming periods. As per the evaluation of liquidity, it is found that there are mixed results. The collection period of company is not sound and shall be improved by reducing the debtors on credit.
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
FINANCIAL ANALYSIS4 References Al Nimer, M., Warrad, L., & Al Omari, R. (2015). The impact of liquidity on Jordanian banks profitabilitythroughreturnonassets.EuropeanJournalofBusinessand Management,7(7), 229-232. Borio, C., Gambacorta, L., & Hofmann, B. (2017). The influence of monetary policy on bank profitability.International Finance,20(1), 48-63. Chadha, S., & Sharma, A. K. (2015). Capital structure and firm performance: Empirical evidence from India.Vision,19(4), 295-302. Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector dominance ratioanalysisoffinancialmarkets.PhysicaA:StatisticalMechanicsandits Applications,421, 488-509.
FINANCIAL ANALYSIS5 Appendix Ratios of Kaizer2017201820172018 Liquidity Current RatioCurrent Assets12498154770.800.86 Current Liabilities1555518002 collection period3653653658.9230.39 accounts receivable turnover ratio40.9112.01 cash on handcash on hand55212906.0312.65 (operating expenses-non cash expenses)/365 (34620- 1217)/365 (38480- 1264)/365 average payment period average account payable2043735722.6974.12 (total credit purchase/days in period)(32869/365) (36229/36 5) Profitability operating marginoperating income159113984.4%3.5% total revenue3621139878 total marginNet income257520407.1%5.1% total revenue3621139878 return on net assetNet income257520408.9%8.7% (fixed asset + net working capital ) (25907+3057 ) (26097- 2525) Activity Ratios Fixed Asset TurnoverNet sales36211398781.391.54 Fixed Assets2609725907
FINANCIAL ANALYSIS6 Current Asset TurnoverNet sales33621398782.692.58 Current Assets1249815477 Inventory TurnoverInventory * 36577526056319523.5915.55 Cost of goods sold3286936229 Total Asset efficiencyNet sales36211398780.050.52 Total Assets73338376436 Age of Plant Accumulated Depreciation250382609320.5720.64 Depreciation Expense12171264 Capital Structure Net Asset FinancingDebt8891865431%29% Equity2895330136 Long term debt to capital Ratio Long term liabilities889186540.120.11 Long term liabilities + shareholders’ Equity7338376436 Debt Service Ratio Net operating income3621139878 344.8 7 1595. 12 Debt service10525 Cash Flow to debt Cash flow from operations315537067%8% Total Business debt4443046300