Financial Ratio Analysis Example

This assignment presents an in-depth analysis of various financial ratios applied to a hypothetical company. It covers key areas such as profitability (e.g., net profit margin), liquidity (e.g., current ratio), and solvency (e.g., time interest earned ratio). The analysis also delves into dividend ratios, including dividend yield and payout ratio. The provided data is structured in tables for clarity and includes both horizontal and vertical analyses of the company's financial statements.

Individual report analysing the performance and operations of
a public listed company
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Table of Contents
INTRODUCTION................................................................................................................................5
SECTION A..........................................................................................................................................5
1. Company selection........................................................................................................................5
2. Introduction of company...............................................................................................................5
3. Horizontal & vertical analysis of Casa Holdings Ltd for five consecutive years.........................5
4. (A). Economic conditions.............................................................................................................6
(B) & (C) Profitability performance.................................................................................................6
5 Dividend ratios...............................................................................................................................7
6. Stability and Liquidity................................................................................................................10
7. Efficiency performance..............................................................................................................13
SECTION B........................................................................................................................................14
1 & 2. Business news and its impact on Casa Holdings Ltd..........................................................14
3. Board of Director’s team and their roles....................................................................................14
4. Comparison of Net asset value per share from current price level.............................................15
4. CONCLUSION..............................................................................................................................16
REFERENCES...................................................................................................................................18
APPendix............................................................................................................................................20
Appendix 2. Horizontal P&L..........................................................................................................23
Appendix: 3. Horizontal balance sheet...........................................................................................24
Appendix: 4. Vertical P&L.............................................................................................................25
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Appendix: 5. Vertical balance sheet................................................................................................25
3

Figure 1: DPS................................................................................................................................................................................................................8
Figure 2: EPS................................................................................................................................................................................................................9
Figure 3: Current ratio.................................................................................................................................................................................................10
Figure 4: Quick ratio...................................................................................................................................................................................................11
Figure 5: Debt-equity ratio..........................................................................................................................................................................................12
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INTRODUCTION
With the changing era, companies are require to evaluate their performance on a consistent basis to determine that whether they have
brought any improvement in their performance or not. Casa Holdings Ltd is a public limited company of Singapore that delivers various home
and cooking equipments to global customers. The present project report aims at examining the performance of the business for recent five
financial years through ratio analysis, horizontal and vertical analysis as well. It will examine firm’s profitability performance and financial
health through comparing solvency, liquidity and efficiency ratios. On the basis of such analysis, investor will be advised that whether to invest
or not in Casa Holdings Ltd.
SECTION A
1. Company selection
Casa Holdings Ltd
2. Introduction of company
Casa Holdings Ltd specializes in manufacturing and distribution of different types of home and cooking appliances such as bathroom and
kitchen fixtures, ventilating system, drying machines, air-conditioning and many others. It is a public listed organization which was incorporated
in the year 1994 and begun operations in 1976. Its product portfolio consists of three major products that are consumer electronic goods, home
appliances and bathroom fixtures. EF, ELBA, CHATEAU, BLOMBERG, BEKO FERIOLI is the top-most brand of the company that is
preferable by the larger number of customers and meet their demand. It operates at different locations such as Singapore, China, Malaysia,
Morocco and other countries of the world. This project report will shed light on the stability, liquidity, profitability and financial status of the firm
for five years ranging from 2012 to 2015 through computing ratios.
3. Horizontal & vertical analysis of Casa Holdings Ltd for five consecutive years
Refer to Appendix 2, 3, 4 & 5.
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Taking into account the results, it can be seen that during the period of 5 years, Casa’s revenues shows a negative trend as in 2014, 2015
and 2016, it came down by 3.23%, 40% and 5.56% respectively. It is the reason behind declined gross return of the firm. Change in society’s
preferences, taste and attitude, substitute project, inflated product prices, high level of competition, substitute product availability are the reason
behind decreased revenues. However, on the other side, SG&A expenditures got improved in 2014 by 20% however, in 2015, it dropped down to
25% is a sign of better control over cost. At the end of the year 2016, Casa holding’s net profitability just doubled and came to 8 SGD million.
While, on the other hand, if we look cost percentage of sales then it shows moderate fluctuations as in 2012, it was 61.29% resulted down to
58.82% in 2016.
While, on the other hand, looking at the balance sheet figures, it can be observed that total current assets shows rising trend as it got
increased from 41.94% to 56.30% in 2015 but in 2016, it resulted down to 52.55%. However, non-current assets also shows downward trend and
came down from 58.06% to 47.45%. Fluctations in accounts payable, tax payable & short-term capital lease shows a volatile trend in current
liabilities as in 2012, it was reported to 14.52% of total assets got improved to 23.56% in the end of the period whereas non-current liabilities got
improved from 28.47% to 32.59% in 2015 due to more borrowed funds but in 2016, it dropped down to 24.09%.
4. (A). Economic conditions
Singapore is considered as wealthiest nations from the perspective of taxation, GDP, per capita income, purchasing power parity, etc. Thus,
the economic condition of Singapore is highly stable, and living of standard of people resides there is also very high. With the rise in disposable
income people prefer to spend money on cooking and home appliances which offer a unique experience to them. Thus, the economic condition
of Singapore will aid in the profit margin of Casa Holdings Ltd to a large extent.
(B) & (C) Profitability performance
In the year 2012, CHL's GM was 38.71% got improved to 43.46% in 2014 and then fallen to 40.83% in 2016. Ineffective control over the cost of
goods sold, high production cost, excessive supplier charges and reduction in turnover were the reasons for the declined gross return indicates
that company's performance has value/number (Kogadeeva and Zamboni, 2016).
Till 2014, operating profit margin (OPM) was near to 6%, however, after this, it shows negative return to 9.44% and 13.02%. Lack of
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managerial control over sales, general and admin expense (SG&A) and less turnover to only 16,850 SGDm are the responsible reasons behind
negative operational income reflects poor business performance.
Net Margin (NM) shows the highly fluctuating trend as in 2012, it was reported to 29.03%, decreased to 15.61% in 2014 and got inclined to
43.33% while in 2016, again dropped down to 0.59%. Huge decrease in turnover due to lowering consumer demand, availability of substitute
products at cheaper rates, competitive pressure and poor control over spending resulted NM downward demonstrates that it is not performed well
in this year (Tsai and et.al., 2016).
Return on assets dropped down from 14.52% to 0.07% in the year 2016 indicates that yield percentage on total assets employed by CHL
has been reduced. Less net earnings because of overspending and poor revenues and rising corporate assets had decreased ROA shows that CHL
obtained less return on their total business assets.
ROE shows a consistent decline as it got declined from 16.98% to 0.13% exhibits that Casa Holdings Ltd acquired lower earnings on their
total shareholder’s equity capital invested in the firm. Fall in net corporate yield and higher collection of money from equity investors declined
the return on equity capital.
5 Dividend ratios
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2012 2013 2014 2015 2016
0
0.002
0.004
0.006
0.008
0.01
0.012
0.01 0.01 0.01 0.01 0.01
DPS
DPS
Figure 1: DPS
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2012 2013 2014 2015 2016
0
0.01
0.02
0.03
0.04
0.05
0.06
0.04
0.05
0.02
0.04
0
EPS
EPS
Figure 2: EPS
DPS of Casa Holding Ltd was constant within the period of 5 years such as 0.01. Hence, getting a high level of dividend is one of the main
objectives of the firm behind making the investment. Along with this, earning which is associated with per share also decreased from 0.04 to 0.00
in 2016 which is not a good indicator for a firm. Hence, by considering such aspects, it can be said that investment ratios of the firm are not good.
Thus, in order to attract large number of shareholders company is needed to make modifications in its existing dividend policies and framework.
(Kural and et.al., 2016).
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6. Stability and Liquidity
2012 2013 2014 2015 2016
0
0.5
1
1.5
2
2.5
3
3.5
4
3
1.96
2.79
3.8
2.23
CR
CR
Figure 3: Current ratio
By making an evaluation of financial statements of Casa Holding Ltd it has been assessed that at the end of 2016 current ratio of the firm
decreased from 3 to 2.23. Hence, during of 5year -current year ratio of the firm is showing the fluctuating trend in the performance level and
aspects. In the accounting year 2016, the current ratio the business organization was 2.23 that are highly near to the ideal level. Hence, an
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outcome of such ratio clearly presents that business unit has enough current assets to meet the obligations. Casa Holding Ltd has two current
asserts to meet or fulfill one monetary obligation.
2012 2013 2014 2015 2016
0
0.5
1
1.5
2
2.5
3
2.22
1.48
2.55
2.15 2.1
QR
QR
Figure 4: Quick ratio
Along with this, the quick ratio of Casa Holding Ltd was 2.22 and 1.48 in the year of 2012 & 2013. On the other side, in the financial year
2015 and 2016 quick ratio was 3.61& 2.11. Hence, by considering this, it can be said that quick ratio of the firm lies in the range of the 1.48 to
3.61. Thus, the quick ratio of the company is greater than ideal aspects such as .5:1. By taking into consideration all such aspects it can be stated
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that liquidity position and performance of Casa Holding Ltd is sound. Further, the company needs to make the focus on investing money in other
profitable investment options that make a contribution to the growth and profit margin of it.
2012 2013 2014 2015 2016
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.17
0.28
0.78 0.79 0.81
DER
DER
Figure 5: Debt-equity ratio
 1= 2012
 2 = 2013
 3 = 2014
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 4 = 2015
 5 = 2016
The debt-equity ratio of Casa Holding Ltd is continuously growing from 2012 to 2016. In the accounting year, 2012 debt equity ratio of
the firm was .17, whereas it has been reached on .81 in 2016. Hence, in 2016, debt-equity ratio exceeded standard aspect such as .5:1. Thus, by
taking into consideration such aspects it can be said that business unit needs to reduce its dependency level on debt instruments. Moreover, it the
case of debentures business unit is obliged to make interest payment (Camin and et.al., 2016). Thus, a shortly company needs to issue shares and
debentures by taking into consideration the ideal ratio. On an overall basis solvency position of the firm is good to the significant level.
7. Efficiency performance
Asset turnover ratio of Casa Holding Ltd declined from .50 to .12 during of five years. This aspect shows that efficiency level of personnel
decreased to a large extent. Moreover, such measure indicates how efficiently human resources of the firm have made optimum use of assets
while performing the business activities and functions (Anish and Majhi, 2016). Hence, it is highly required for the the firm to encourage their
personnel to give their best efforts while performing the tasks.
Debtor turnover ratio of Casa Holding Ltd was 4.33 and 4.22 in the financial year 2012 & 2013. In contrast to this, such ratio of firm
inclined from 4.29 to 4.76 at the end of 2016. Hence, it shows that in 2016 company has taken more days to collect its receivables as compared
to before times. This in turn closely influences the working capital of firm and thereby smooth functioning of the business operations and
functions.
By doing, ratio analysis, a significant declining trend has been identified in creditor’s turnover ratio. In the year of 2016, creditor turnover
ratio of Casa Holding Ltd was declined from 9.50 to 4.76. Hence, now the business unit has an obligation to make a payment earlier. Hence, less
credit period was offered to Casa Holding Ltd from suppliers. By this aspect, now the business unit is required to maintain a high level of
liquidity which in turn helps it in making payment to suppliers within the suitable time frame (Erasmus and et.al., 2016).
During the accounting period from 2012 to 2016 inventory turnover ratio of Casa Holding Ltd decreased from 2.71 to 2.50. Hence, in the
year of 2016 inventory of firm was not sold and replaced more frequently in comparison to before years (Hau and Lai, 2016). Thus, the company
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needs to employ inventory control tools and techniques such as EOQ, budget, etc. which in turn helps it in maintaining ideal inventory turnover
ratio.
SECTION B
1 & 2. Business news and its impact on Casa Holdings Ltd
Global leaders who are involved in the tax and advisory services recommended to Singapore government to offer high tax exemptions and
thereby attract more business. Moreover, entrepreneurs are encouraged to do business when they get a high level of tax benefits. Along with this,
safeguarding about the explicit tax rules will also encourage companies to do business beyond Singapore (2 things that can attract new players to
set up shop in Singapore, 2017). In this, such news will create high-level competition within the industry and thereby affects the profit margin of
Casa Ltd. The rationale behind this, tax exemption is one of the main benefits that motivate business entity to implement their unique ideas. Thus,
the highly competitive situation will influence both productivity and profitability aspect of Casa Holdings Ltd.
3. Board of Director’s team and their roles
By making an evaluation of the annual report of Casa Holding Ltd it has been assessed that there are mainly five members which are
included in the list of executive and non-executive directors. Hence, a list of such directors is enumerated below:
Directors name Designation
Dr. Low Seow Chay Chairman and independent director
Lim Soo Kong @ Lim Soo Chong CEO and executive director
Hu Zhong Huai Non-executive and non-independent director
Lim Tian Poh Independent Director
Stefan Matthieu Lim Shing Yuan Non-executive and non-independent director
Hence, all such chairman, directors, and non-executive directors play an important role in setting the vision, mission, goals as well as
strategies for the firm. Thus, directors and nonexecutive directors have accountability to ensure proper management of the business performance.
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Team of higher department also gives approval for the corporate direction and strategy. Along with this, directors also make monitoring of the
management’s performance. In addition to this, corporate governance report shows that director’s team also has accountability to give approval
for budget and other investment options which will prove to be more profitable for the firm (Annual report of Casa Holding Ltd, 2015). Further,
such members of Board also take a decision about financial and human resources that are needed for fulfilling the organizational aims and
objectives. Board of directors also makes an effort about identifying the key stakeholder groups and give approval for the nomination of
directors. All the above mentioned higher authorities also have the responsibility to make the review of the financial performance of a business
organization and thereby take action for further improvement. Moreover, maintenance of stakeholder’s faith is one of the main responsibilities of
directors. In this, by taking significant action within the suitable time frame team of higher management can achieve the mission, vision and
goals to the significant level. Director’s team also sets ethical value standards with the aim to ensure that all the obligations are met.
Besides this, with the aim to enhance a reputational aspect of the company higher management also lays emphasis on sustainable
environment at the time of decision making. Further, people involved in the team of higher management also lay emphasis on the delegation of
responsibilities to the three committees such as audit, nominating and remuneration. Report of corporate governance also entails that Board also
has an obligation to give approval for the annual reports and accounts as well as corporate strategies. Executive and non-executive directors have
accountability to decide and declare the interim dividend (Gowri and Deo, 2016). Hence, it can be said that Board plays a crucial role in making
cost effectual decisions and thereby aid in the growth and success of the firm.
4. Comparison of Net asset value per share from current price level
Number of outstanding shares = 209826
Current share price = 0.07 SGD (Casa Holding Ltd, 2017)
Particulars Formula Figures
Net assets value Total assets – intangible assets – liabilities 135- (36 + 64)
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Net asset value per share Net asset value / number of shares outstanding
(Net assets value, 2017)
= 35000000 / 209826
= 166.80
Hence, by evaluating the share price in against to net asset value per security it has been assessed that Casa Holding Ltd presents an
investment opportunity to the large extent (Van der Stede, 2016). Moreover, the share price of Casa Holding Ltd is undervalued so by making the
purchase of shares at low prices investors can generate high return significantly.
4. CONCLUSION
From the above report, it has been concluded that profitability aspect of Casa holding is not good. It can be revealed from the report that
solvency and liquidity position of the business organization was sound in 2016 as compared to before times. Along with this, it has been
articulated that news about taxation will place the high level of impact on the overall functioning of a firm. Besides this, it can be inferred that
investors should make the purchase of Casa Holding Ltd shares on market price which is highly favorable.
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REFERENCES
Books and Journals
Anish, C. M. and Majhi, B., 2016, March. Prediction of mutual fund net asset value using low complexity feedback neural network. In Current
Trends in Advanced Computing (ICCTAC), IEEE International Conference on (pp. 1-5). IEEE.
Camin, F. and et.al., 2016. Stable Isotope Ratio Analysis for Assessing the Authenticity of Food of Animal Origin. Comprehensive Reviews in
Food Science and Food Safety. 15(5). pp.868-877.
Erasmus, S.W. and et.al., 2016. Stable isotope ratio analysis: A potential analytical tool for the authentication of South African lamb meat. Food
chemistry. 192. pp.997-1005.
Gowri, M. and Deo, M., 2016. Prediction Model of The Net Asset Returns of Indian Equity Fund of Mutual Funds With Application of Ar. Indian
Journal of Applied Research. 5(10).
Hau, H. and Lai, S., 2016. Asset allocation and monetary policy: Evidence from the eurozone. Journal of Financial Economics. 120(2). pp.309-
329.
Kogadeeva, M. and Zamboni, N., 2016. SUMOFLUX: A Generalized Method for Targeted 13 C Metabolic Flux Ratio Analysis. PLoS Comput
Biol. 12(9). p.e1005109.
Kural, M. A. and et.al., 2016. Quantitative MUP and peak ratio analysis in diagnosis of myopathy. Clinical Neurophysiology, 127(3), p.e35.
Tsai, J. and et.al., 2016. Lymph node ratio analysis after neoadjuvant chemotherapy is prognostic in hormone receptor-positive and triple-
negative breast cancer. Annals of Surgical Oncology, 23(10), pp.3310-3316.
Van der Stede, W., 2016. Big data, bigger picture, financial management. Financial Management. pp.40-43.
Online
2 things that can attract new players to set up shop in Singapore. 2017. Online. Available through: <http://sbr.com.sg/economy/news/2-things-
can-attract-new-players-set-shop-in-singapore >. [Accessed on 16thJanuary 2017].
Annual report of Casa Holding Ltd. 2015. Online. Available through: < http://infopub.sgx.com/FileOpen/Casa%20AR2015_REVISED
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%20VERSION.ashx?App=Prospectus&FileID=27834>. [Accessed on 16thJanuary 2017].
Casa holding Ltd. 2017. Online. Available through: < http://www.google.com/finance/historical?q=SGX
%3AC04&ei=3a58WIDEE5WuugTdnrSQCQ>. [Accessed on 16thJanuary 2017].
Net assets value. 2017. Online. Available through: < http://www.investinganswers.com/financial-dictionary/mutual-funds-etfs/net-asset-value-
155>. [Accessed on 16thJanuary 2017].
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APPENDIX
Particulars
Amount (In SGD Million) except ratios
2012 2013 2014 2015 2016
Profitability ratios Formulas
Gross profit 12 11.9 10.3 7.4 6.9
Net profits 9 9.5 3.7 7.8 0.1
Operating profit 2 1.6 1.5 -1.7 -2.2
revenues 31 31 23.7 18 16.9
Gross profit margin (Gross profit/Total sales)*100 38.71%
38.39
% 43.46% 41.11% 40.83%
Net profit margin (Net profit/Total sales)*100 29.03%
30.65
% 15.61% 43.33% 0.59%
operating profit margin (operating profit/Total sales)*100 6.45% 5.16% 6.33% -9.44% -13.02%
Average total assets 62 69 110 139.45 135.9
Average shareholders’ equity (Opening +closing)/2 53 56.25 70.1 78.1 75.45
Return on assets (net profit/total assets)*100 14.52%
13.77
% 3.36% 5.59% 0.07%
Return on shareholders’ equity
(Net profit/average Shareholders
equity)*100 16.98%
16.89
% 5.28% 9.99% 0.13%
Liquidity ratios
Current assets 27 32.4 84.4 77.2 71.7
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current liabilities 9 16.5 30.3 20.3 32.1
Inventory 7 8 7 4 4
Current ratio (Current assets/Current liabilities) 3.00 1.96 2.79 3.80 2.23
Quick ratio/acid test ratio (Current assets-stock)/current liabilities 2.22 1.48 2.55 3.61 2.11
Efficiency ratios
Average debtors 7 7.35 6.25 4.2 3.55
Creditors 2 2.5 2.55 2.15 2.1
Net purchase 19 19.1 13.4 10.6 10
Average inventory 7 7.5 7.5 5.5 4
Average total assets 62 69 110 139.45 135.9
Days of sales outstanding Average receivables/Net revenue*365 82.42 86.54 96.26 85.17 76.67
Days inventory outstanding (average inventory/Cost of sale)*365 134.47 143.32 204.29 189.39 146.00
Payable days (average payables/cost of sales)*365 38.42 47.77 69.46 74.03 76.65
Cash conversion cycle
(Receivable days + Inventory days -
Creditors days) 178.47 182.09 231.09 200.52 146.02
Inventory turnover ratio (COGS/Inventory) 2.71 2.55 1.79 1.93 2.50
Debtors turnover ratio (Revenues/Average accounts receivables) 4.43 4.22 3.79 4.29 4.76
Creditors turnover ratio (Net credit purchase/Average creditors) 9.50 7.64 5.25 4.93 4.76
Assets turnover ratio (Revenue/average total assets) 0.50 0.45 0.22 0.13 0.12
Solvency/leverage ratios
Long-term debts 0 0 33 36 25.8
Shareholders’ equity 53 59.5 80.7 75.5 75.4
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Total liabilities 9 16.5 63.3 59.4 61.4
Debt to equity ratios (Total liabilities /Shareholders equity) 0.17 0.28 0.78 0.79 0.81
Gearing ratio
(Common stockholders’ equity/Fixed
interest bearing funds) 0.00 0.00 2.45 2.10 2.92
Interest expense 0.00 0.00 0.00 2.00 2.00
Time interest earned ratio
Income earned before interest &
tax/Interest expenditures NA NA NA -0.85 -1.10
Dividend ratios
net profit 9 9.5 3.7 7.8 0.1
Number of shares
209826(Rounded off in Millions) 210 210 210 210 210
EPS
(Total net profit available for
shareholders/Number of shares) 0.04 0.05 0.02 0.04 0.00
Total dividend distributed (In
millions) 2.1 2.1 2.1 2.1 2.1
DPS
(total dividend distributed among
shareholders/Number of shares) 0.01 0.01 0.01 0.01 0.01
Dividend yield ratio (DPS/Share price) 0.045 0.040 0.036 0.030 0.029
Dividend payout ratio DPS/EPS 0.23 0.22 0.57 0.27 21.00
Dividend cover ratio EPS/DPS 4.29 4.52 1.76 3.71 0.05
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Appendix 2. Horizontal P&L
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Appendix: 3. Horizontal balance sheet
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Appendix: 4. Vertical P&L
Appendix: 5. Vertical balance sheet
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