Question

2. Use the financial statements below to analyze its: 2.1. Uquidity ratio 2.2.Profitability ratio 2.3. Activity ratio and 2.4.Leverage ratio 2.5. Analyze and Interpret the outcomes CICIKBF ENTERPRISES, INC. STATEMENT OF FINANCIAL POSITION FOR DEC. 31, 2015 AND 2016 (IN THOUSAND) 2016 2017 ASSETS Assets P2,030.5 2,636.0 (224.0) 2,636.0 23,520.5 256.0 P32,923.0 P1,191.0 4,002.0 (208,5) 4,002.0 18,384.5 379.5 P28,132.0 405.5 405.5 9,136.5 5,964.0 10,761.5 6,884.0 (5,764.0) (3,765.0) 14,649.0 9,488.5 186.5 334.0 P47,649.0 P37,954.5 Current Assets Cash Accounts Receivable Allowance for doubtful accounts Marketable Securities Inventories Prepaid expenses Total Current Assets Property, plant and Equipment Land Buildings and leasehold improvements Equipment Less: Accumulated depreciation and amortization Net Property, plant and Equipment Other Assets Total Assets Liabilities and Equity Current Liabilities Accounts Payable Notes Payable-Banks Current Maturities of long-term debt Accrued Liabilitles Total Current Liabilities Deferred Income taxes Long-term Debt Total Liabilities Equity Ordinary shares P.V.P1, authorized 10,000,000 Shares, issued, 2,297,000 shares in 2016 and 2,401,500 shares in 2015 Additional paid-in capita! Retained Earnings Total Equity Total Liabilities and Equity P7,147.0 P3,795.5 2,807.0 3,006.0 942.0 758.0 2,834.5 2,656.5 P13,730.5 P10,216.0 421.5 317.5 10,529.5 8,487.5 24,681.5 19,021.0 P2,401.5 478.5 20,087.5 22,967.5 P47,649.0 P2,297.0 453.0 16,181.5 18,933.5 37,954.5

Answer 1

Noticed that , Total Current Asset number as per Question is not correct . Please look into this matter while checking answer . Most important to understand the concept/ logic of financial Ratio  

		2016(p'000)	2017(p'000)
Current Asset
Cash		2,031	1,191
Account Receivable		2,636	4,002
Allowance for Doubtful debt		(224)	(209)
Marketable Securities		2,636	4,002
Inventories		23,520	18,385
Prepaid Expenses		256	379
Total Current Asset		30,855	27,750
As per Question		32,923	28,132	( Looks like Question number is not correct)
Current Liability
Account Payable		7,147	3,796
Note Payable - Bank		2,807	3,006
Current maturities of Long term Loan		942	758
Accrued Liability		2,835	2,657
Total Current Liability		13,731	10,216
Liquid Ratio
While calculating Liquid ratio, not to consider Inventory and Prepaid amount under Current Asset
Current Asset ( as above)		30,855	27,750
Less:
Inventory		23,520	18,385
Prepaid Expenses		256	379
Net Current Asset		7,079	8,987
( Inventory and Prepaid are npt easily converted into Cash element)
Current Laibility		13,731	10,216
Liquid Ratio
Adjusted Current Asset/Current Liability		0.52	0.88
Interpretation -
Liquid ratio is increased in 2017 mainly due to increase in Account Receivable Balance

	2016(p'000)	2015(p'000)	2014(p'000)
Sales(a)	1,07,800	76,500	70,350	-0.347402597
Cosy of goods sold	64,682	45,940	40,803	-0.36917535
Gross Proifit(b)	43,118	30,561	29,547
Gross Proifit %(a/b)	40.00%	39.95%	42.00%
Selling and Administrative	16,332	13,191	12,749
Advertising	7,129	5,396	4,751
Lease payment	6,529	3,555	3,634
Depreciaiton / Amortization	1,999	1,492	1,251
Repair & Maintenance	1,508	1,023	1,516
Total(C)	33,497	24,657	23,900	( as per Question 23919 Sum Miscalculated
Operating Profit(b-C)=D	9,621	5,904	5,647
Operating Profit %(D/a)	8.9%	7.7%	8.0%
Interest Income	211	419	369.00
Interest Expenses	-1292	-1138	-687
Earning Before Inome Tax(EBT)(e)	8,540	5,185	5,329
Earning Before Inome Tax(EBT)%(e/a)	7.9%	6.8%	7.6%
Income Tax	-3843	-2229	-2412
Net Income(f)	4,697	2,956	2,917
Net Income%(f/a)	4.36%	3.86%	4.15%

Company Gross Margin was excellent on 2014 ( 42% ) , Subsequently dropped in Margin . 2016 , Margin slightly better than 2015

Revenue growth is improved in 2016 (35%) but cost also increased

by 37% as compared with 2014 . So Overall margin dropped in 2016

Operating margin slightly better in 2016 as compared with 2014 mainly due to control on Indirect cost . Company as compared with revenue , major control established in Selling &Admin cost on 2016 as compared with 2014.

Companies EBT is also slightly improve in 2016 . Good news is company can manage Interest Payment with help of current Operating Margin .

Company Gross Margin around 40% on YOY , after absorb all other expenses + Depreciation + Interest cost , company maintain margin 4% on YOY

	2016(p'000)	2017(p'000)
land	406	406
Building & leasehold Improvement	9,137	5,964
Equipment	10,762	6,884
Less:
Accumulated depreciation & Amortization	(5,764)	(3,765)
Net property	14,540	9,489	Net Property sum is not correct as per Question
Other assets	187	334
Total Asset(a)	14,727	9,823
revenue ( as above)(b)	1,07,800	Data Missing
Total Assets Turnover Ratio(a/b)	7
('Revenue/ Total Asset)== Formula
Fixed Asset Turnover ratio
Fixed Asset(c)	14,540	9,489
revenue ( as above)(b)	1,07,800
Fixed Asset Turnover ratio
('Revenue/ Fixed Asset)== Formula	7
Debtors Turonver Ratio
Credit Sales ( as above)	1,07,800
Average debtors( gross )(as above)	5,272
('Credit sales / Avg Debtors)== Formula	20
Inventory Turonver Ratio
Cost of Goods Sold( as above)	64,682
Average Inventory( gross )(as above)	23,520
('Cost of Goods sold / Avg Inventory)== Formula	3
Creditors Turonver Ratio
Purchase( as calculated - see below logoc)	96,180
Avg Creditors( as above)	7,147
('Purchase / Avg Creditors)== Formula	13
Purchase include - Cost of Goods sold
Plus Otehr indirect expenses ( Other than Depreciation + interest cost)
Cash conversion cycle
Debtors turnover ratio	20
Inventory Turnover Ratio	3
Creditors Turnover Ratio	(13)
Cash conversion cycle	10

Total Asset Turnover ratio represents that Company generate enough revenue to cover Total asset of the company in 2016. Year 2017 – PNL data not available

Fixed asset turnover ratio also represent same as above . Revenue is enough to cover Fixed Asset

Cash conversion cycle is positive of the company . It represent that company is well managing Working capital matter .

Company Total Debt = Short term debt like : Note payable to Bank + Current maturities of Long term loan + Long term debt =p’000 14729 /12,252 , which is well covered by companies Equity . So Company is not at Risk .

Leverage ratio mainly calculate to identify the risk In this case we noticed that companies is managing Interest cost and Operating Margin can support the same . Also moderate Debt Equity ratio and alos noticed that company reduced long term debt burden in 2017 as compared with 2016

	2016(p'000)	2017(p'000)
Current Liability
Account Payable	7,147	3,796
Note Payable - Bank(a)	2,807	3,006
Current maturities of Long term Loan(b)	942	758
Accrued Liability	2,835	2,657
Total Current Liability	13,731	10,216
Deferred Tax	422	318
Long Term Debt(c)	10,530	8,488
Total Liabilities	24,682	19,022
Equity ( as per Question)(e)	22,968	18,934
Total Debt - Short term + Long term(a+b+c)=d	14,279	12,252
Debt/ Equity(d/e)	0.62	0.65