International Accounting - Appunti

Analisi dei rapporti finanziari

ROE: 192000/(280000 + 286700) = 192000/566.700 = 0,338 = 34%

184500/(30000 + 165400) = 184500/465400 = 0,396 = 40%

*Il capitale proprio è dato dalla somma del capitale sociale e degli utili trattenuti.

Rapporti di liquidità

Cash ratio: (60100+0)/(160000+43000) = 60100/203.000 = 0,296 = 0,3

(64200+0)/(145400+42000) = 64200/187.400 = 0,342 = 0,3

*I bond sono passività a lungo termine, non passività correnti che includono debiti commerciali e debiti fiscali.

*Non ci sono titoli negoziabili, quindi si considera il valore zero.

Current ratio: (123000+117800+69000+60100)/(160000+43500) = 369.900/203.500 = 1,8

(115000+102800+50000+64200)/(145500+42000) = 332.000/187.500= 1,8

*Gli attivi correnti non includono gli attivi immobiliari.

Acid test ratio: [(117800+69000+60100-123000) – 123000 ] / (160000+43500) = 246.900/203.500 = 1,213

(102800+50000+64200)/ (145500+42000) = 217.000/187.500 = 1,157

*In questo caso puoi sottrarre l'inventario dagli attivi correnti o calcolare direttamente gli attivi senza l'inventario.

Receivables collection period: 117800/1818500 x 365 = 0,0647 x 365 = 23,64 = 24 days

102800/1750500 x 365 = 0,0587 x 365 = 21,43 = 21 days

Payables collection period: 160000/1011500 x 365 = 0,158 x 365 = 57,73 = 58 days

145400/996000 x 365 = 0,146 x 365 = 53,29 = 53 days

Inventory turnover: 123000/1011500 x 365 = 0,1216 x 365 = 44,4 = 44 days

115000/996000 x 365 = 0,115 x 365 = 42,14 = 42 days

Gearing ratio: 200000/ (280000 + 286700) = 200000/566.700 = 0,352 = 35,3% (of long term debt, in this case bonds)

200000/ (30000 + 165400) = 200000/465400 = 0,429 = 43% (of long term debt, in this case bonds)

Interest cover: 291000/18000 = 16275500/14000 = 203. You make the comment. Let’s see this phase in detail.

1. you notice the ratios are generally increasing. Make a brief comment on the general situation.

2. You move to a ratio by ratio approach. Are all the profitability ratios increasing? What about the other two types?

3. You comment on the profitability ratio.

3a.

receivables the company needs around 3 weeks, and just a few days more in the second year. It has acouple of months to pay its payables, this time increase slightly in the second year. The company is able to collectthe money twice before the payments of its liabilities. The inventory turnover shows that the items are kept on stockhalf and one month, so we can say that the company probably reinvest the money in inventory and then pays thesuppliers.

The company has no problem in liquidity with this strategy and this is confirmed by the fact that both current andacid test ratio are higher than one.

3c. Let's talk about the two solvency ratios.

3c.c. The gearing ratio measures the amount of internal and external equities that are financing the company, in thiscase we can deduce from the financial statement that are bonds and equities. This ratio is increasing, this meansthat there is a decrease in equities in favor of bonds. The reason is that there is an increase of bonds while

equities are stable. When we look at the interest cover we notice that there is a lower level of operating income available to pay interest expense, but the interest cover is still increasing. There is an increase in interest cover because the operating income is decreasing and the interest expenses is decreasing, proportionately, even more. The company is able to pay its interest expense back with its operating income.

Exercise number 2:

Anno 2 – Anno 1

Gross profit margin: 185.000/600.000 = 31% | 166.000/520.000 = 32%

Net profit margin : 56.400/600.000 = 9,4% | 45.200/520.000 = 8,7%

ROA : 56400/638.000 = 8,8% | 45.200/560.000 = 8,1%

ROE : 38.400/373.000 = 10,3%| 31.200/350.000 8,9%

Asset turnover: 600.000/638000 = 0.9 | 520.000/560.000 = 0.9

Cash Ratio: (21.000+0) / 145.000 = 0.1 | (18.000+0) / 130.000 = 0.1

Current Ratio: 215.000 / 145.000 = 1.5 | 177.000 / 130.000 = 1.3

Acid test ratio : 125.000 / 145.000 = 0.9 | 107.000 / 130.000 = 0.8

Receivables collection period: 86.000/600.000 x 365

= 52 days | 74.000/520.000 x 365 = 52 days

Payables collection period: 122.000/415.000 x 365 = 107 days | 110.000/354000 x 365 = 113 days

Inventory turnover: 90.000/415.000 x365 = 79 days | 70.000/354.000 = 72 days

Gearing ratio: 120.000/373.000 = 32% | 80000/350.000 = 23%

Interest coverage: 64.200/7.800 = 8 | 51.200/6.000 = 81.

First, I give a look to have a better understanding for the comment. Looking at the income statement and balance sheet, I notice that there is no substantial change but a general increase of the volume of sales, income and investment on assets. On equity side we notice that share capital is stable and an increase of retained earnings. On both years the company has a profit.

2. Looking at the ratio we can comment that we can say that there is a common increase or decrease in value. Stability is observed at a certain extent.

3. Profitability ratios. Gross profit is decreasing, net profit is increasing. Gross profit is decreasing because both sales and cost of goods sold

are increasing, the increase of sales (numerator, on the top) is higher than the cost of goods sold (denominator, on the bottom). The net profit is increasing because net profit before taxes (numerator) is lower than the increase in sales (denominator). Moreover, there is a huge reduction of more than 20 points from gross to net profit, this is due, once again, to high administrative and selling expenses.

There is an increase on ROA and ROE. The slight increase may be explained for ROA because the asset turnover does not change, the ability of making profit from assets stay stable throughout. ROE is increasing because net income increases more than equity in comparison with the previous year. The asset turnover is lower than one, this means that the investment in assets is not giving back as much as the investment, nor more.

4. Liquidity ratios. We can see that cash, current and acid test ratio are pretty stable. Cash ratio is much lower than this may be due to the type of activity, for sure.

it’s not a retail company. Current ratio is higher than 1 but there is no increase in the use of current assets in paying the current liabilities. From current to acid test ratio we can notice an important decrease, this means that inventory plays an important and necessary role to the payment of current liabilities. The acid test ratio is below 1, this mean it would be impossible to pay back liabilities without using the inventory. However, inventory is the less liquid current asset in the balance sheet therefore it may be difficult to convert it in cash.

Receivable collection period stays the same, there is a light reduction in the time the company needs for the payment of suppliers. Inventory stays on stock one week longer than the previous year. We assume the company can collect the receivables twice before paying its payables, so that it is possible to invest in inventory in the meantime.

5. Solvency ratios. Gearing ratios has an important increase of around ten points, the interest

coverage stays stable. The gearing ratio increases because even though there is an increase in returned earnings and therefore on equity (internal funding), the increase on bonds (external funding) is even higher. The interest coverage is equal to eight because with the increase in bonds there is also an increase in income before taxes.

[Below ex 3]

Exercise 3

We are in the automotive sector, so some values could be linked to the type of activity. In the exam, if there is reference to activity sector you should also refer to it.

1. Calculate the ratios.

2012 | 2011

Gross profit margin: 289.000/667.000 = 43% | 316000/599000 = 52%

Net profit margin: 103.000/667000 = 15.4% | 128.000/599000 = 21.4%

ROE: 69000/286.000 = 19.3% | 75000/267000 = 27.7%

ROA: 103000/889000 = 11.6% | 128000/773000 = 16.6%

Asset turnover: 667.000/889000 = 0.8 | 599000/773000 = 0.8

Cash ratio: 37000/286000 = 0.1 | 40000/267000 = 0.15

Current ratio: 602000/286000 = 2.1 | 497000/267000 = 1.9

Acid test ratio: 249000/286000 = 0.9 |

211000/267000 = 0.8

Receivables collection period: 208000/667000 x365 = 114 days | 151000/599000 x365 = 92 days

Payables collection period: 205000/378000 x365 = 198 days | 190000/283000 x365 = 245 days

Inventory turnover: 352000/378000 x365 = 340 days | 286000/283000 x365 = 369 days

Gearing ratio: 245000/358000 = 68% | 235000/271000 = 86,7%

Interest cover: 160000/57000 = 3 | 169000/41000 = 42.

We give a quick look at the items, lot of them are decreasing like profit, income, retained earnings, cash. There are increasing assets (but I can suppose that the ROA is diminishing).

Profitability. All the ratios are decreasing. Gross profit margin have a decrease around ten points, the reason is that even though the sales are increasing, the cost of good sold is also increasing, making the gross profit reduce. Net profit margin is decreasing even though the selling and administrative expenses have been cut, in fact also the cost of goods sold has increased considerably. ROE decr