Question substitute for some part of Question 78 and 9 Evalu

Question (substitute for some part of Question 7,8, and 9)

Evaluate the financial performance of the two companies and then determine which is the best as required below?

Company X

Company Y

Item

1

2

3

4

5

1

2

3

4

5

Current ratio

1.11

1.14

1.20

1.26

2.05

4.20

5.49

4.02

4.85

8.97

Quick ratio

0.41

0.42

0.43

0.44

0.76

0.35

0.17

0.15

0.20

4.78

Net cash from operating(Million)

121

97

92

125

165

29

16

28

53

3

Net cash from Investing (Million)

-10

-15

-6

-6

-33

28

-2

-23

-1

-1

Net cash from Financing (Million)

-111

-79

-81

-115

-115

-56

-17

-4

-51

244

Net cash (Million)

0

3

5

4

17

0

-4

1

1

246

Gross profit margin

0.24

0.25

0.22

0.20

0.19

0.36

0.35

0.37

0.35

0.42

Net profit margin

0.17

0.18

0.16

0.15

0.15

0.12

0.03

0.12

0.11

0.12

Return of Assets

0.15

0.17

0.19

0.19

0.24

0.03

0.01

0.03

0.04

0.02

Return of Equity

0.27

0.31

0.34

0.36

0.35

0.04

0.01

0.04

0.05

0.02

EPS

16.68

19.73

22.67

20.10

29.37

3.43

0.74

3.24

3.41

1.80

Receivables Turnover

5.71

6.16

7.25

8.38

10.62

9.38

11.48

17.13

23.10

19.32

Inventories Turnover

2.10

2.40

2.70

3.00

3.80

0.30

0.30

0.30

0.40

0.30

Assets Turnover

0.90

1.00

1.20

1.40

1.80

0.20

0.20

0.20

0.30

0.20

Cost of sales/ sales

0.76

0.75

0.78

0.80

0.81

0.64

0.65

0.63

0.65

0.58

Liabilities/ Assets

0.45

0.45

0.46

0.47

0.32

0.33

0.28

0.29

0.23

0.09

In general, which company is better in liquidity and why?

In general, which company is better in efficiency and why?

In general, which company is better in profitability and why?

In general, which company is more risky and why?

Select at least three problems that each company has faced?

In general and based in your answers, which company is better financial performance and why?

	Company X	Company Y
Item	1	2	3	4	5	1	2	3	4	5
Current ratio	1.11	1.14	1.20	1.26	2.05	4.20	5.49	4.02	4.85	8.97
Quick ratio	0.41	0.42	0.43	0.44	0.76	0.35	0.17	0.15	0.20	4.78
Net cash from operating(Million)	121	97	92	125	165	29	16	28	53	3
Net cash from Investing (Million)	-10	-15	-6	-6	-33	28	-2	-23	-1	-1
Net cash from Financing (Million)	-111	-79	-81	-115	-115	-56	-17	-4	-51	244
Net cash (Million)	0	3	5	4	17	0	-4	1	1	246
Gross profit margin	0.24	0.25	0.22	0.20	0.19	0.36	0.35	0.37	0.35	0.42
Net profit margin	0.17	0.18	0.16	0.15	0.15	0.12	0.03	0.12	0.11	0.12
Return of Assets	0.15	0.17	0.19	0.19	0.24	0.03	0.01	0.03	0.04	0.02
Return of Equity	0.27	0.31	0.34	0.36	0.35	0.04	0.01	0.04	0.05	0.02
EPS	16.68	19.73	22.67	20.10	29.37	3.43	0.74	3.24	3.41	1.80
Receivables Turnover	5.71	6.16	7.25	8.38	10.62	9.38	11.48	17.13	23.10	19.32
Inventories Turnover	2.10	2.40	2.70	3.00	3.80	0.30	0.30	0.30	0.40	0.30
Assets Turnover	0.90	1.00	1.20	1.40	1.80	0.20	0.20	0.20	0.30	0.20
Cost of sales/ sales	0.76	0.75	0.78	0.80	0.81	0.64	0.65	0.63	0.65	0.58
Liabilities/ Assets	0.45	0.45	0.46	0.47	0.32	0.33	0.28	0.29	0.23	0.09

Solution

Answer (1)- Better in Liquidity- Company \"X\" is more liquid as if we see its Quick ratio through out the four periods, these are higher than the company Y\'s quick ratio. Quick ration indicates liquidity position of the company.

Answer (2)- Better in Efficiency- Company \"X\" is better as far as efficiency is concerned. If we see \" Inventory and Asset turnover\" we find that company X has higher ratios than company Y. Company X is efficiently using its assets and is able to sell its inventory fast but as far as Receivable turnover, company Y is better, its receivable turnover is higher than company X that indicates company Y collects its receivables very fast.

Answer (3)- Better Profitability- If we analyze, \"Gross profit margin, Net profit margin, Return on Equity, Return on Assets and EPS, we find that company X\'s ratios are far better than company Y. Company X is more profitable than company Y.

Answer (4)- In terms of debt, company X is more risky. Liabilities / Assets ratio indicates that company X has more debt than company Y.

Answer (5)- Both companies are facing negative cash flow from investing and financing activities. Net cash is negative in both the companies.

Answer (6)- In general, I think company X is in better position than company Y. Its profitability, efficiency and liquidity positions are better than that of company Y.