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Analyzing Profitability and Risk Ayala Corporation
Analyzing Profitability and Risk Ayala Corporation
Makati, Philippines
Members:
De Castro, Roselyn B.
Liquidity Ratio
Additionally, we calculated Ayala Corporation’s risk ratios, which are used to evaluate a
company’s financial health and are used to assist in the decision-making process when making
investment decisions. We can use this to determine how well a company can manage its debt
while also evaluating the company’s capital structure and the current risk it is exposed to. In both
2019 and 2020, the company’s computed Debt of Equity is 2.53. As a result, the outstanding debt
of the company is 2.5 times greater than the amount of equity in the company. It is a little risky
for the company because the greater the amount of debt, the greater the likelihood that earnings
will be violated due to increased interest expenses as well as increased vulnerability to business
downturns. As for the company’s capital ratio, it calculated 1.51 in the year 2019 and increased
to 1.64 in the following year 2020. It is beneficial for the company to have a ratio of 1.64, as it
indicates that the company is on solid financial ground in terms of liquid assets. So, based on
this, we can conclude that Ayala Corporation is still a suitable investment for investors, despite
the fact that it is a risky investment due to the high debt to equity ratio. For Ayala Corporation,
the debt ratio is calculated at 0.62 during 2019, and at 0.61, or 61 percent, in 2020. The debt-ratio
of Ayala Corporation is considered higher for others, which means that borrowing money is
more difficult in this case. It also mean that the vast majority of Ayala Corporation’s assets are
financed through debt. In conclusion with this information, we can conclude that Ayala
Corporation faces a little amount of risk when it comes to their debt obligations.