IKEA's Financial ratios

Profitability ratios
IKEA 2018 IKEA 2019 IKEA 2020 EVALUATION

performance ROE 19.9% 17.9% 18.1%

based on its ROTA 9.1% 8.6% 10.5%

past ratios ROS 7.7% 7.4% 9.4%

Asset turnover 1.19 1.17 1.12

Liquidity ratios

Current ratio 1.36 1.53 1.74

Quick ratio 0.65 0.81 1.04

Inventory days 66.26 62.50 56.59

Accounts receivable days 57.88 68.00 81.55

Accounts payable days 70.19 64.92 55.69

Financial strength ratios

Interest coverage 4.41 5.02 5.30

Debt to equity 2.12 1.82 1.51

Cost of debt 2.88% 2.44% 2.91%

IKEA's
Retail industry
Financial ratios IKEA 2020 Walmart 2020 VALUATION
in the US 2020
Profitability ratios

performance ROE 18.1% 1.9% 16.6%

based on ROTA 10.5% 2.2% 10.7%

competitors ROS 9.4% 2.8% 4.8%

and industry Asset turnover 1.12 n.a. 2.21

average Liquidity ratios

Current ratio 1.74 1.32 0.97

Quick ratio 1.04 0.60 0.49

Inventory days 56.59 61.00 29.34

Accounts receivable days 81.55 10.00 4.25

Accounts payable days 55.69 n.a. 32.08

Financial strength ratios

Interest coverage 5.30 2.18 4.10

Debt to equity 1.51 1.82 2.25

Cost of debt 2.91% n.a. 3.60%

IKEA's
ROE values over the years show that IKEA is a riskier company compared to
Walmart and other competitors in the US retail industry. It is worth paying
attention to the decreasing ROE in the past three years. However, ROE shows that
performance the returns in this company are high enough to justify investments.
ROTA and ROS show that IKEA effectively uses its assets to make profits; these
values are higher than Walmart and the other competitors in the US retail
An example of industry.
a correct Asset Turnover has a negative trend, meaning that IKEA is decreasing its
analysis efficiency in using its assets to generate sales. Also, Asset Turnover in 2020 is
lower than Walmart's. The asset turnover ratio tends to be higher for companies
in the Retail industry. Hence, lower values may indicate that Ikea's collection
period may be too long, leading to higher accounts receivable. Indeed, Account
Payable days are lower than Account Receivable, meaning that IKEA pays its
suppliers before creditors. The values are negative even when compared to
Walmart and the US retail industry. This trend was opposite in 2018, emphasizing
the importance of focusing on this matter.
Current ratio and quick ratio values show that IKEA may cover the obligation
due shortly. From 2018, the values of Liquidity ratios changed positively, improving
their relative performance compared to Walmart and the other competitors in the
US retail industry.
Finally, financial strength ratios, which provide IKEA's ability to meet interest
and payments, in the long run, are improving from the values in 2018. IKEA is in a
better position compared to Walmart and other competitors in the US retail
industry.