The following ratios have been calculated for the Solar Tech Company. Analyze the profitability of Solar Tech Company.
2015 2016
Gross profit margin 37.0% 42.5%
Operating profit margin 4.7% 21.7%
Net profit margin 1.3% 17.2%
Cash flow margin 20.4% 25.9%
The following ratios have been calculated for the Solar Tech Company. Analyze the profitability of Solar Tech Company.
2015 2016
Gross profit margin 37.0% 42.5%
Operating profit margin 4.7% 21.7%
Net profit margin 1.3% 17.2%
Cash flow margin 20.4% 25.9%
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Related questions
1. From the data on the financial statements below, use your skills as a GBA 490 student to offer a robust quantified analysis and assessment of this firmâs financial fitness.
A. Find Growth:
Revenue, CAGR
B. Find Profitability:
Gross Profit Margin, Operating Profit Margin, Net Profit Margin, Working Capital, ROA, ROE
C. Find:
Current Ratio, Total debt-to-Assets Ratio, TImes Interest Earned
| (All $ In thousands) | 2012 | 2013 | 2014 | 2015 | 2016 |
| Revenue | $61,093 | $74,452 | $88,988 | $107,006 | $135,987 |
| COGS | 45,971 | 54,181 | 62,752 | 71,651 | 88,265 |
| Operating Expenses | 14,446 | 19,519 | 26,058 | 33,122 | 43,536 |
| Interest Expense | 287 | 317 | 252 | 687 | 390 |
| Tax | 428 | 161 | 167 | 950 | 1,425 |
| Net Income | (39) | 274 | (241) | 596 | 2,371 |
| Inventory | 6,031 | 7,411 | 8,299 | 10,243 | 11,461 |
| Current Assets | 21,296 | 24,625 | 31,327 | 35,705 | 45,781 |
| Total Assets | 32,555 | 40,159 | 54,505 | 64,747 | 83,402 |
| Current Liabilities | 19,002 | 22,980 | 28,089 | 33,887 | 43,816 |
| Total Liabilities | 24,363 | 30,413 | 43,764 | 51,363 | 64,117 |
| Total Equity | 8,192 | 9,746 | 10,741 | 13,384 | 19,285 |
| Liabilities + Equity | 32,555 | 40,159 | 54,505 | 64,747 | 83,402 |
3. The following ratios and inventory levels are for the Sterling Company for each of the past 3 years:
| Sterling Company | |||||
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|
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| Industry |
| |
| Ratio | 2007 | 2008 | 2009 | 2009 | CS:â2009 vs. Industry Average |
| Current ratio | 1.40 | 1.55 | 1.67 | 1.85 | TS: |
| CS: | |||||
| Quick ratio | 1.00 | 0.92 | 0.88 | 1.05 | TS: |
| CS: | |||||
| Inventory turnover | 9.52 | 9.21 | 7.89 | 8.60 | TS: |
| CS: | |||||
| Average collection | TS: | ||||
| âperiod | 45.6 days | 36.9 days | 29.2 days | 35.5 days | CS: |
| Average payment | TS: | ||||
| âperiod | 59.3 days | 61.6 days | 53.0 days | 46.4 days | CS: |
| Total asset turnover | 0.74 | 0.80 | 0.83 | 0.74 | TS: |
| CS: | |||||
| Debt ratio | 0.20 | 0.20 | 0.35 | 0.30 | TS: |
| CS: | |||||
| Times interest earned | 8.2 | 7.3 | 6.5 | 8.0 | TS: |
| CS: | |||||
| Fixed payment | TS: | ||||
| âcoverage ratio | 4.5 | 4.2 | 2.3 | 4.2 | CS: |
| Gross profit margin | 0.30 | 0.27 | 0.25 | 0.25 | TS: |
| CS: | |||||
| Operating profit | TS: | ||||
| âmargin | 0.12 | 0.12 | 0.13 | 0.10 | CS: |
| Net profit margin | 0.062 | 0.062 | 0.066 | 0.053 | TS: |
| CS: | |||||
| Return on total | TS: | ||||
| âassets | 0.045 | 0.050 | 0.055 | 0.040 | CS: |
| Return on common | TS: | ||||
| âEquity | 0.061 | 0.067 | 0.085 | 0.066 | CS: |
| Earnings per share | TS: | ||||
| â(EPS) | $1.75 | $2.20 | $3.05 | $1.50 | CS: |
| Price/earnings | TS: | ||||
| â(P/E) | 12.0 | 10.5 | 13.0 | 11.2 | CS: |
| Market/book ratio | TS: | ||||
| â(M/B) | 1.20 | 1.05 | 1.01 | 1.10 | CS: |
a) In the last column above, indicate the following:
Under TS: indicate whether the performance improved or deteriorated over the years.
Under CS: indicate how the company performed overall against the industry average (poor, fair, better).
b) Analyze Sterlingâs overall financial situation from both a cross-sectional and a time-series viewpoint for the following areas:
- Liquidity performance
- Activity performance
- Debt performance
- Profitability performance
- Market performance
| Financial Ratios | Competitive Comparison | |||||
| Liquidity (Balance Sheet) | Calculations | Starbucks | Yum! | |||
| 2010 | 2009 | 2008 | 2010 | 2010 | ||
| Current Ratio | 1.49 | 1.14 | 1.39 | 1.55 | 0.94 | |
| Quick or Acid Test | 1.22 | 0.96 | 1.18 | 0.98 | 0.69 | |
| Inventory to net working capital | 0.08 | 0.25 | 0.11 | 0.56 | -1.4 | |
| Activity (Balance Sheet) | ||||||
| 2010 | 2009 | 2008 | ||||
| Inventory turnover | 219.06 | 214.17 | 210.96 | 8.21 | 42.96 | |
| Fixed asset turnover | 1.09 | 1.06 | 1.16 | 4.43 | 2.96 | |
| Total Asset Turnover | 0.75 | 0.75 | 0.83 | 1.68 | 1.36 | |
| Leverage (Balance Sheet) | ||||||
| 2010 | 2009 | 2008 | ||||
| Debt to Assets Ratio | 0.36 | 0.35 | 0.36 | 0.08 | 0.35 | |
| Long-term debt to equity ratio | 0.79 | 0.75 | 0.76 | 0.15 | 2.28 | |
| Debt to equity | 1.18 | 1.15 | 1.13 | 0.74 | 3.98 | |
| Times-interest earned ratio | 16.53 | 14.71 | 12.78 | 44.94 | 9.17 | |
| Profitability (Income Statement) | ||||||
| 2010 | 2009 | 2008 | ||||
| Gross profit Margin | 0.40 | 0.39 | 0.37 | 0.58 | 0.16 | |
| Operating profit margin | 0.31 | 0.31 | 0.28 | 0.13 | 0.15 | |
| Net Profit margin | 0.21 | 0.20 | 0.18 | 0.08 | 0.1 | |
| Return on total assets | 0.15 | 0.15 | 0.15 | 0.15 | 0.14 | |
| Return on equity | 0.34 | 0.32 | 0.32 | 0.26 | 0.73 | |
Using the above Mcdonalds financial information, discuss the meaning of the calculated ratios in a general sense and specifically what they mean for the main organization. Also evaluate your calcualted ratios in light of some comparitive standard such as the industry averages or specific competitors (note: I completed the competitive numbers... now just have to analyze).
Discuss: A. Which ratios you would find most useful in making day-to-day management decisions, and why?
B. Which of the ratios you would find most useful in making strategic deicision, and why?
