School of Business

CASE STUDY (9) – FIN 315

Presented to Dr. Jad Najem

Kazayzan, Christopher T. 202201667

Khaled, Pierre P. 202101460
Mahfouz, Mia K. 202101008
Mazraani, Joey G. 202202291
Medlej, Georges F. 202100686
Hatem, Juliano H. 201901446
Questions:

1. Analyze the comparative income statement of the company as well as its

balance sheet. (15 points)

2. Prepare (i) the common size balance sheet and the common size income
statement and (ii) the indexed income statement and the indexed balance sheet.
Interpret the outcome. (15 points)

3. Build the cash flows and describe what cash flows conclusions can you conclude
based on the income statement and balance sheet of the company. (15 points)

4. Calculate and analyze major ratios of the company and compare with the
industry (minimum of 12 ratios using the different types of ratios). (40 points)

5. Based on all the above, analyze the financial position of the company. (15 points)
Answers:

1. Analyze the comparative income statement of the company as well as its

balance sheet.

Beta Corp LLC (Case

9)
Balance Sheet as at December 31
ASSETS 2020 2021 2022
-Cash & Banks 1007631 469950 215582
-Accounts Receivable 176727 203415 331439
-Inventory - Stock 395723 391080 497652
-Other Receivables 2832 1894 4321
-Advances to Employees 1806 1883 3092
TOTAL CURRENT ASSETS 1584719 1068223 1052086
-Buildings 394314 445499 443737
Property, Plant & Equipment 226243 221913 294518
-Other Fixed Assets 31485 29163 395595
-Less Accumulated Depreciation -67871 -106847 -157526
TANGIBLE FIXED ASSETS 584170 589727 976324
TOTAL ASSETS 2168889 1657949 2028409
LIABILITIES 2020 2021 2022
-Short Term Debt To Banks 121300 46613 50786
-LTD - Current Portion 38590 34253 42346
-Notes Payable 8994 3877 7215
-Accounts Payable (Suppliers) 208538 240030 312878
-Other Current Liabilities 18757 16743 18367
TOTAL CURRENT LIABILITIES 396179 341515 431591
-Long Term Payables 1667319 1066137 1237248
TOTAL LIABILITIES 2063498 1407652 1668839
-Capital 100000 100000 100000
-Retained Earnings -326545 5390 150297
-Net Result For The Year 331935 144907 109274
TOTAL EQUITY 105390 250297 359571
TOTAL LIABILITY & EQUITY 2168888 1657949 2028410

Income Statement For The Period Covering January 1 to December 31

Amounts in USD 2020 2021 2022

Sales 2264161 2119727 2739574

NET SALES 2264161 2119727 2739574
Cost of Goods Sols 701707.00 642652.00 927405.00
GROSS PROFIT 1,562,454 1,477,075 1,812,169
General & Administrative Expenses 431098.00 488315.00 621236.00
Salaries Expenses 601392.00 687810.00 877655.00
Promotion Expenses 66853.00 61321.00 82471.00
Adervtising Expenses 28328.00 25984.00 34945.00
Other Operating (Expense)/Income 8357.00 7665.00 10309.00
EBITDA 426,427 205,980 185,553
Depreciation 42,157 38,976 50,679
EBIT 384,270 167,004 134,875
Other Income
Interest Income 9704 5959 7835
Interest Expense 13502.00 12536.00 12576.00
FX (Gain/Loss) 3723.00 4240 5959.00
NET PROFIT BEFORE TAXES 377,199 164,667 124,175
Taxes 45,264 19,760 14,901
NET PROFIT AFTER TAXES 331,935 144,907 109,274
IS:
In the income statement, we can see that revenues are increasing from 2.2 million in 2020
to 2.7 million in 2022. Revenues in this case indicates a good sign for the company, and it
is gaining market share and selling products.

Gross profit also increases from 1.5 million in 2020 to 1.8 million in 2022, which is a good
sign for the company.

Moreover, Net profit decrease from 331 935 in 2020 to 109 274 in 2020 because of the
high cost of expenses that increase from 2020 to 2022 by 200 000.

In addition, EBITDA decrease from 426 427 in 2020 to 185 553 because the company’s
expenses increase for 200 000 from 2020 to 2022.

Expenses increase because general & administrative expenses increase from 431098 in
2020 to 621 236 in 2022 and because salaries increase from 601392 in 2020 to 877 655 in
2022. So, the Net Profit decrease from 331 935 in 2020 to 109274 in 2022.

BS:

Assets:
We can see that total assets are decreasing from 2.2 million in 2020 to 2 million in 2022.
Total assets mainly decrease because of the decrease in current assets from 1.5 million in
2020 to 1 million in 2022. In addition, because of the decrease in tangible fixed assets
from 2.2 million in 2020 to 2 million in 2022.

Moreover, when assets go down, cash goes up. For example, Inventory – Stock is
decreasing from 395,723 in 2020 to 391,080 in 2021. So, the cash goes up and the
difference is (4,643).

Liabilities:
We can see that total liabilities decrease from 2 million in 2020 to 1.6 million in 2022 due
to the decrease of long-term payables from 1.6 million in 2020 to 1.2 million in 2022. In
addition, due to the decrease of short-term debt to banks from 120 000 in 2020 to 50 000
in 2022.
 Moreover, when notes payable were decreasing from 8,994 in 2020 to 3,877 in 2021, cash
goes down. So, when liabilities increase, cash goes up.

Equity:
Equity is increasing from $105,390 in 2020 to $359,571 in 2022 because retained earnings
increase in these 2 years to $150,297 in 2022.

2. Prepare (i) the common size balance sheet and the common size income
statement and (ii) the indexed income statement and the indexed balance
sheet. Interpret the outcome.

Calculations On Excel.

Answer number 2
Indexed BS
Common size BS assets
2020 2021 2022 2020 2021 2022
46.46% 28.35% 10.63% 100.00% 46.64% 21.39%
8.15% 12.27% 16.34% 100.00% 115.10% 187.54%
18.25% 23.59% 24.53% 100.00% 98.83% 125.76%
0.13% 0.11% 0.21% 100.00% 66.88% 152.58%
0.08% 0.11% 0.15% 100.00% 104.26% 171.21%
73.07% 64.43% 51.87% 100.00% 67.41% 66.39%
18.18% 26.87% 21.88% 100.00% 112.98% 112.53%
10.43% 13.38% 14.52% 100.00% 98.09% 130.18%
1.45% 1.76% 19.50% 100.00% 92.63% 1256.46%
-3.13% -6.44% -7.77% 100.00% 157.43% 232.10%
26.93% 35.57% 48.13% 100.00% 100.95% 167.13%
100.00% 100.00% 100.00% 100.00% 76.44% 93.52%
Common sizeL&E 2020 2021 2022 INDEX L&E 2020 2021 2022
5.59% 2.81% 2.50% 100.00% 38.43% 41.87%
1.78% 2.07% 2.09% 100.00% 88.76% 109.73%
0.41% 0.23% 0.36% 100.00% 43.11% 80.22%
9.61% 14.48% 15.42% 100.00% 115.10% 150.03%
0.86% 1.01% 0.91% 100.00% 89.26% 97.92%
18.27% 20.60% 21.28% 100.00% 86.20% 108.94%
76.87% 64.30% 61.00% 100.00% 63.94% 74.21%
95.14% 84.90% 82.27% 100.00% 68.22% 80.87%
 4.61% 6.03% 4.93% 100.00% 100.00% 100.00%
-15.06% 0.33% 7.41% 100.00% -1.65% -46.03%
15.30% 8.74% 5.39% 100.00% 43.66% 32.92%
4.86% 15.10% 17.73% 100.00% 237.50% 341.18%
100.00% 100.00% 100.00% 100.00% 76.44% 93.52%

Answer number 2
Common size IS index is
2020 2021 2022 2020 2021 2022

100.00% 100.00% 100.00% 100.00% 93.62% 121.00%

30.99% 30.32% 33.85% 100.00% 91.58% 132.16%
69.01% 69.68% 66.15% 100.00% 94.54% 115.98%
19.04% 23.04% 22.68% 100.00% 113.27% 144.11%
26.56% 32.45% 32.04% 100.00% 114.37% 145.94%
2.95% 2.89% 3.01% 100.00% 91.73% 123.36%
1.25% 1.23% 1.28% 100.00% 91.73% 123.36%
0.37% 0.36% 0.38% 100.00% 91.72% 123.36%
18.83% 9.72% 6.77% 100.00% 48.30% 43.51%
1.86% 1.84% 1.85% 100.00% 92.45% 120.21%
16.97% 7.88% 4.92% 100.00% 43.46% 35.10%

0.43% 0.28% 0.29% 100.00% 61.41% 80.74%

0.60% 0.59% 0.46% 100.00% 92.85% 93.14%
0.16% 0.20% 0.22% 100.00% 113.89% 160.06%
16.66% 7.77% 4.53% 100.00% 43.66% 32.92%
2.00% 0.93% 0.54% 100.00% 43.66% 32.92%
14.66% 6.84% 3.99% 100.00% 43.66% 32.92%
Interpretation:
Common size bs:
Assets: We can see that current assets decrease from 73% to 51% because cash & banks
decrease from 46% in 2020 to 10% in 2022.
Also, we can see that fixed assets increase from 27% in 2020 to 48% in 2022 because
property, plant & equipment increase from 10% in 2020 to 15% in 2022 and building
increase from 18% in 2020 to 22% in 2022.

Liabilities: We can see that current liabilities are increasing from 18% in 2020 to 22%
because of the account payables from 9% in 2020 to 16% in 2022.
Concerning equity, it is increasing from 5% in 2020 to 18% in 2022 due to the retained
earning that increase to 15% in 2022.

Common size is:

We can see that expenses increase. For example, salaries expenses increase from 26% in
2020 to 32% in 2022.
EBITDA decrease from 19% in 2020 to 7% in 2022 because gross profit decrease from 70%
IN 2020 to 66% in 2022.
That’s why, net profit decrease from 15% in 2020 to 4% in 2022.

Index bs:
Total current assets decrease to 66% in 2022 because cash & banks decrease from 27% in
2021 to 21% in 2022.
Also, fixed assets increase to 67% in 2022 because other fixed assets increase 256% in
2022.
In addition, total liabilities increase 50% in 2022 because account payables increase from
115% in 2021 to 150%.
Total equity increases from 2020 to 2022 by 241%

Index IS:
Gross profit increase from 95% in 2021 to 116% in 2022 due to the increase of net sales.
EBITDA decrease from 48% in 2021 to 43% in 2022 because expenses of the company are
increasing.
EBIT is decreasing from 43% in 2021 to 35% in 2022 because depreciation between these
2 years is increasing.
 So, net profit after taxes is decreasing from 43% in 2021 to 33% in 2022 which means that
the company is generating in 2022 less than it generated in 2021.

3. Build the cash flows and describe what cash flows conclusions can you
conclude based on the income statement and balance sheet of the
company.

CASH FLOW CALCULATIONS ON EXCEL

Answer number 3
Cash flow 2021 2022
Net Profit 144,907 109,274
Depreciation & Amortisation 38,976 50,679
Variations
AR (26688.00) (128024.00)
Inventory 4643 (106572.00)
Other AR 938.00 (2427.00)
Advance to employees (77.00) (1209.00)
Short term debt to banks (74687.00) 4173.00
LTD-Current portion (4337.00) 8093.00
Notes Payables (5117.00) 3338.00
Account payable (suppliers) 31492 72848
Other Current Liabilities (2014.00) 1624.00
OCF 108,036 11,797
Long term Payables (601182.00) 171111.00
Capital 0.00 0.00
FCF (601182.00) 171111.00
Building (51185.00) 1762.00
Property, plant& Equipment 4330 (72605.00)
Other fixed assets 2322 (366432.00)
ICF (44533.00) (437275.00)
Cash movement (537,679.00) (254,367.00)
Opening cash balance 1007631 469950
Ending cash balance 469,952.00 215,583.00
Interpretation of cash flow:

2020-2021:
The company started in 2020 with $1,007,631 of cash. This amount decreases in 2021 to
$469,950; it indicates that the company is not profiting as it was in 2020.

Concerning the operating cash flow that is positive at $30,084 because Account payable
(suppliers) are increasing, so the cash will increase from 2020 to 2021 by a difference of
$31,492. So, the company is generating cash flows because OCF is positive.

Moreover, financing cash flow is negative at $(601,182) because of the long-term payable
that decrease from 2020 to 2021 and the difference is $(601,182.00) with no capital. FCF
is negative which indicates that the company is paying its liabilities.

Moreover, investing cash flow is negative at $(44,533) because building is decreasing by a

difference between 2020 and 2021 of $(51,185.00). So, ICF is negative, and it means that
the company is investing FA in building.

2021-2022:

The cash of the company decrease from $469,950 in 2021 to $215,582 in 2022, which
indicates that the company it not profiting as it was in 2021.

The operating cash flow is negative at $(89,561) because AR are increasing, and the
difference is at $(128,024.00). So, OCF is negative which is a bad sign for the company.

Concerning financing cash flow, FCF is positive at $171,111 because long-term payables
are increasing at $ 171,111. FCF is positive which means there is a new capital in the
company.

In addition, investing cash flow is negative at $(437,275) because property, plant&

equipment is decreasing from 2021 to 2022 at a difference $(72,605). ICF is negative, and
it means that the company is investing FA in plant& equipment.
 4. Calculate and analyze major ratios of the company and compare with the
industry (minimum of 12 ratios using the different types of ratios).

Industry Ratios
Sales Growth -1% Return on Assets 17%
Income Growth 1% Return on Equity 331%
Asset Growth -7% Gross Interest Coverage 30.6X
Gross Profit Margin 69% Net Interest Coverage 28.8X
Net Operating Margin 18% Days In Inventories 237
Profit Margin 15% Average Collection Period 23
Current Ratio 4.32 Average Payable Period 87
Quick Ratio 2.28 Debt to Assets 0.86
Equity/Total Assets 0.05 Debt to Equity 19.58

Major ratios of the company and compare with the industry:

1. Current ratio:
• Type: liquidity ratio
• High or low: high
• Measurement: Measures whether current assets are sufficient to fund current
liabilities.
• Formula: CA/CL

• Calculation:

- CR 2020: 1584719/396179= 4
- CR 2021: 1068223/341515= 3.13
- CR 2022: 1052086/431591= 2.4

• Interpretation:
- 2020: For each 1$ of CL, the company has 4$ of CA.
If it liquidates all its CA, it will cover all its CL and will have excess cash.
 - 2021: For each 1$ of CL, the company has 3.13$ of CA.
If it liquidates all its CA, it will cover all its CL and will have excess cash.
- 2022: For each 1$ of CL, the company has 2.4$ of CA.
If it liquidates all its CA, it will cover all its CL and will have excess cash.

• Comparison with the industry: CR industry = 4.32

- 2020: CR of the company is lower than CR of the industry.
- 2021: CR of the company is lower than the CR of the industry.
- 2022: CR of the company is lower than the CR of the industry.

In these 3 years, the company is doing less because, the CR of the company in
2020,2021 and 2022 is lower than the CR of the industry.

2. Quick ratio:

• Type: liquidity ratio

• High or low: high
• Measurement: measures whether Current assets are sufficient to fund current
liabilities without inventory.
• Formula: CA – inventory/CL

• Calculation:

QR 2020: 1584719 – 395723/396179 = 3

QR 2021: 1068223 – 391080 /341515= 2
QR 2022: 1052086 – 497652 /431591 = 1.3

• Interpretation:
- 2020: For every 1$ of CL, the company has 3$ of CA excluding inventory. If it
liquidates all its CA except inventory, it will cover all its CL and will have excess cash.

- 2021: For every 1$ of CL, the company has 2$ of CA excluding inventory. If it

liquidates all its CA except inventory, it will cover all its CL and will have excess cash.

- 2022: For every 1$ of CL, the company has 1.3$ of CA excluding inventory. If it
liquidates all its CA except inventory, it will cover all its CL and will have excess cash.

• Comparison with the industry: QR of the industry = 2.28

2020: QR of the company is higher than QR of the industry.
2021: QR of the company is lower than the QR of the industry.
 2022: QR of the company is lower than the QR of the industry.

In 2021 and 2022, the company is doing less because, the QR of the company in 2021 and
2022 is lower than the QR of the industry.

3. Average collection period:

• Type: Asset management ratio

• High or low: low
• Measurement: measures the number of days it takes to the company to collect its
AR into Cash.
• Formula: (AR/Sales) *365days

• Calculation:

ACP 2020: (176727 / 2264161) *365= 28 Days

ACP 2021: (203415/ 2119727) *365= 35 Days
ACP 2022: (331439/2739574) * 365=44 Days

• Interpretation:

- 2020: the company needs an average of 28 days to convert its AR into Cash.
- 2021: the company needs an average of 35 days to convert its AR into Cash.
- 2022: the company needs an average of 44 days to convert its AR into Cash.

• Comparison with the industry: ACP of the industry = 23 days

In these 3 years, the company is providing a longer-term credit to the industry (ACP
company higher than ACP industry).

4. Days inventory outstanding:

• Type: inventory ratio

• High or low: low
• Measurement: measures the average number of days a company holds its
inventory before selling it.
• Formula: (Inventory/COGS) *365
• Calculation:
 - DIO 2020: (395723/ 701707) * 365= 205.8
- DIO 2021: (391080/ 642652) * 365= 222.1
- DIO 2022: (497652/ 927405) * 365= 195.9

• Interpretation:

- 2020: For every 1$ of sales, the company have 206 days of inventory turnover.
- 2021: For every 1$ of sales, the company have 222 days of inventory turnover.
- 2022: For every 1$ of sales, the company have 196 days of inventory turnover.

• Comparison with the industry: industry = 237 days.

The company’s inventory ratio from 2020 to 2022 is lower than the industry’s ratio, which
indicates a good sign for the company.

5. Net Operating margin:

• Type: profitability ratio

• High or low: high
• Measurement: measures how much profit is generated from each dollar of sales
after accounting for both cost of goods sold and operating expenses.
• Formula: EBIT/Sales
• Calculation:
- 2020: 384270 / 2264161= 0.17 = 17%
- 2021: 167004/ 2119727= 0.08 = 8%
- 2022: 134875/ 2739574= 0.05 = 5%
• Interpretation:
- 2019: For each 1$ of sales, the company generates 0.17$ of EBIT.
- 2020: For each 1$ of sales, the company generates 0.08$ of EBIT.
- 2021: For each 1$ of sales, the company generates 0.05$ of EBIT.

• Comparison with the industry: NOM of the industry = 18%

 In all the 3 years, the company is underperforming because the NOM of the industry is
higher than the company.

6. Dept to equity:

• Type: Leverage ratio

• High or low: low
• Measurement: measures how much debt a company has taken on relative to the
value of its assets net of liabilities.
• Formula: TL/TE
• Calculation:
- 2020: 2063498/ 105390= 19.6
- 2021: 1407652/ 250297= 5.6
- 2022: 1668839/ 359571= 4.6
• Interpretation:

- 2020: For each 1$ of equity, the company have 19.6$ of debts.

- 2021: For each 1$ of equity, the company have 5.6$ of debts.
- 2022: For each 1$ of equity, the company have 4.6$ of debts.

• Comparison with the industry: DTE of the industry = 19.58

In 2020, the dept to equity of the company is equal to the dept to equity of the industry.
However, in 2021 and 2022, the Dept of equity of the company is lower than the dept to
equity of the industry.

7. Debt to asset ratio:

• Type: leverage ratio

• High or low: low
• Measurement: measures its assets financed by liabilities (debts) rather than its
equity.
• Formula : TL/TA

• Calculation :
- 2020 : 2063498/ 2168889 = 0.95
- 2021 : 1407652 / 1657949 = 0.85
- 2022 : 1668839 / 2028409= 0.82
 • Interpretation :
- 2020: For each 1$ of assets, the company have 0.95$ of debts.
- 2021: For each 1$ of assets, the company have 0.85$ of debts.
- 2022: For each 1$ of assets, the company have 0.82$ of debts.

• Comparison with the industry: DTA of industry = 0.86

In these 3 years, the company have a DTA ratio higher than the DTA ratio of the industry,
which is not a good sign.

2020: Dept to asset of the company is higher than Dept to asset of the industry.
2021: DTA of the company is lower than the DTA of the industry.
2022: DTA of the company is lower than the DTA of the industry.
In 2021 and 2022, the company have a dept to asset ratio lower than the Dept to asset
ratio of the industry, which is a good sign.

8. Net profit margin:

• Type: profitability ratio

• High or low: high
• Measurement: calculates the amount of money generated for every dollar of sales
• Formula: NI/Sales
• Calculation:
- 2020: 331,935 / 2264161 = 0.14 =14%
- 2021: 144,907 / 2119727 = 0.07= 7%
- 2022: 109,274 / 2739574 = 0.04 = 4%

• Interpretation:
- 2020: For every 1$ of sales, the company generates 0.14$ of NI.
- 2021: For every 1$ of sales, the company generates 0.07$ of NI.
- 2022: For every 1$ of sales, the company generates 0.04$ of NI.

• Comparison with the industry: NI industry =0.69

We can say that the company is underperforming because the NI of the company is lower
than the NI of the industry.
9.Average Payable Period:

• Type: Asset management ratio

• High or low: High
• Measurement: measures how long the company takes to pay its supplier.
• Formula: 365/ APx
• Calculation:
- APP 2020= 365/ 3.365= 108 Days
- APP 2021= 365/ 2.677= 136 Days
- APP 2022= 365/ 2.964= 123 Days
• Interpretation:
APP increased from 2020 to 2021 but decreased in 2022. However, that is not an
issue as it is still well above the industry. The company should be aware not to go below
the industry ratio by negotiating longer payment terms with suppliers.

• Comparison with the industry: industry APP=87days

The company takes longer time than the industry from 2020 to 2022, which is a good
indicator. So, they keep their cash longer when there is more time to pay off its debt.

10.Account Receivable Turnover:

• Type: Asset management ratio

• High or low: High
• Measurement: How many times AR is turned to cash during a year.
• Formula: Sales/ AR

• Calculation:
- ARx 2020= 2,264,161/176,727= 12.8x
- ARx 2021= 2,119,727/203,415= 10.4x
- ARx 2022= 2,739,574/ 331,439= 8.2x
• Interpretation:
 We can see that the company ARx is decreasing from 12.8x in 2020 to 8.2x in 2022.
• Comparison with the industry:
•
The ARx shows a decrease throughout the three years meaning it is getting paid the
customers debts slower and should speed up that process.

11. Gross profit margin:

• Type: profitability ratio

• High or low: high
• Measurement: It shows how well the firm’s management controls its expenses to
generate profits.
• Formula: Gross Profit/Sales
• Calculation:
- 2020 = 1,562,454/2,264,161 = 69%
- 2021 = 1,477,075/2,119,727 = 70%
- 2022 = 1,812,169/2,739,574 = 66%

• Interpretation :

We can see that the GPM is decreasing in general from 69% in 2020 to 66% in 2022.
And it shows that the company is making less money per dollar of sales.

• Comparison with the industry: Industry GPM = 69%

The industry gross profit is at 69% same as 2020. It increased to 70% in 2021 showing
a better result because the company is controlling its expenses and more financially
stable.
Moreover, in 2022 this number decrease below the industry average showing that the
company is making less money per dollar of sale.
12. Return on Equity:

• Type: Financial ratio

• High or low: high
• Measurement: measures the accounting return on the common stockholders’
investment.

• Formula: Net income/ Shareholders equity

• Calculation:

- 2020 = 331,935/105,390 = 315%

- 2021 = 144,907/250,297 = 70.58%
- 2022 = 109,274/359,571 = 30.39%

• Interpretation:
We can see that return on equity is decreasing from 315% in 2020 to 30% in 2022
which indicates that the company is generating less profit in 2022 than 2020.

• Comparison with the industry: Industry ROE= 331%

The return on equity in 2020, 2021 and 2022 are: 315%, 70,58% and 30,39%. They are
lower than the industry average.
As calculations show, a huge decrease between the year 2020 and 2021 and a smaller
decrease between 2021 and 2022 showing negative results because a lower
percentage means that the company profitability decreased to the amount of
shareholders equity.
So, the company is generating less profit per dollar of shareholders equity.

13. Return on Assets:

• Type: Financial ratio

• High or low: high
• Measurement: measures a company's profitability relative to its total assets.
• Formula : Net income/ TA

• Calculation :

- 2020 = 331,935/ 2168889 = 0.15%

 - 2021 = 144,907/ 1657949 = 0.09%
- 2022 = 109,274/ 2028409 = 0.05%

• Interpretation :

We can see that return on assets is decreasing from 0.15% in 2020 to 0.05% in 2022
which indicates that the company is not making enough income from the use of its
assets.

• Comparison with the industry: Industry ROA= 17%

The return on assets in 2020, 2021 and 2022 are: 0.15%, 0.09% and 0.05%. They are
lower than the industry average that is at 17%. It means that return on assets the
company is not making enough income from the use of its assets.

5. Based on all the above, analyze the financial position of the company.

In conclusion, we can see from the balance sheet that assets in 2020, 2021
and 2022 are more than liabilities, and liabilities are decreasing. Till now, it
means that the company has a strong financial health. Also, total equity is
increasing indicating that the company is utilizing its resources efficiently to
generate financial support for its options.
The income statement shows that the gross profit is increasing from 2020 to
2022 but EBIT and net profit before taxes is decreasing because of the
expenses that are increasing from 2020 to 2022. So, when expenses are
increasing, this is a bad sign for the company, and the firm should reduce
expenses in its business using comfortable methods.
Concerning ratios, return on equity is decreasing from 2020 to 2022, this ratio
should be increased to the company’s management will be more efficient and
will produce more growth.
The company can improve its profitability while selling more, higher price and
reducing costs.