Financial ratios analysis Essay

NoCarb Limited Ratio Analysis will cover quad ratio groups Liquidity, Profitability, Activity and Financial structure ratios, in order to hold a better understanding of company financial position. Liquidity ratios vizor the organization ability to satisfy its requirements for cash to meet its obligations based in its current assets. Cash is very authoritative to keep companys operations running. A failure to do that could lead the company to study problems, even a risk of bankruptcy. Nocarb current ratio has improved in 0.44 (1.48 1.04) from previous course of study (2013), this is basically due to the annex of record levels and the modulation of receivables to cash. Quick ratio has decrease precisely in 0.02 (0.37 0.35) non a significant variation. Quick ratio does not consider Inventory, which in this case is not a good idea to omit it, because we do not know how much divers be Nocarbs products. We only certain about gillyflower being made up of aristocraticaldrinks. Profitability ratiosTo measure shekelsability performance, we are going to analyse profit circumference and ROA ratios. Alternative Profit margin bear witnesss the percentage of profit we add from each dollar of gross sales. In the case of Nocarb has increased in 0.96% (16.24 15.28) with lever to 2013. Soft drink industry profitability depends more from the volume of sales rather than the lofty profit earn from each unit. This industry is altogether different from, for example High Tech industry, where volume of sales is venial but with a high rentability per unit or service. There is a significant decline of 1.22% (4.61-3.22) in the ROA ratio (also known as ROI). This harbor indicates that Nocarb is losing efficiency at the moment to generate profit. We invite to analyse activities ratios to throw away a better picture of Nocarb financial position. Activity ( dollar volume) ratiosFrom Note 2 we can see that Inventory level s have eternally increased since 2012. It is not a surprise that years in blood has increased from 285 days to 760 days. This indicates that Nocarb have serious problems with the associated cost of keeping high level of inventory like insurances, obsolescence, handing and warehouse renting cost. This is also reflected in the drop of sales from 59860 in 2013 to 43014 for this year. Nocarb sales on credit. Therefore is important to analyse days in debtor indicator, which indicate how long it takes for Nocarbs customers to pay their debts. We can see that it is taking longer for customers to pay their bills from 285 days in 2013 to 760 days this year. If this becomes a tendency Nocarb can be in risk of running out of cash, necessary for daily operations. This also indicate that Nocarb it is over financing its customers.Financial structure ratioAfter analysing Nocarbs liquidity and activity ratios, which indicates a poor performance, we need to measure the borrowing level of Nocarb. Debt to Equity will help us to see how angry this company is. Debt to Equity ratio has significantly decreased from 294.53% in 2013 to 178% this year but it is still a high level. A ratio of 178% indicates that Nocarb assets are financed mostly with debt, making Nocarb more vulnerable to any fluctuationof pursuit rates.ConclusionSoft drink industry is a mass production industry. We assumed Nocarb does not have a unique product as most of its counterparts. This industry relays in high levels of sales, maximum inventory turnover and minimal levels of inventory to reduce costs. Profit margin ratio is not a good indicator for Nocarb due to the low profit margin per unit usual for mass production industries. Nocarb has serious problems with high levels of inventory and its associated additional costs. This situation is a result of the decline of sales and the increase of inventory, more probably financed by debt as debt to equity ratio indicate. Nocarb need to redesign its Sales and Marketing strategies. Review its supply chain and inventory strategies. Review its Credit Policies and promote Cash sales. Also needs to be very care full with its borrowing/debt level.