FINANCIAL

STATEMENT
ANALYSIS
PROFITABILITY RATIOS
Return on Equity (ROE)
Return on Assets (ROA)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
 Return on Equity (ROE)
- measures the amount of net
income earned in relation
to stockholder’s equity.

ROE = (Net Income ÷ Stockholders’ Equity) x 100%

= (2,659,087÷ 12,478,559) x 100%
= 21.31% or 0.2131
 Return on Assets (ROA)
- measures the ability of a
company to generate income
out of its resources.

ROA = (Operating Income ÷ Total Assets) x 100%

= (4,048,696÷ 22,298,020) x 100%
= 18.16% or 0.1816
 Gross Profit Margin
- measures the ability of a
company to cover its cost of
goods sold from its sales.

GROSS PROFIT MARGIN = (Gross Profit ÷ Sales) x 100%

= (10,546,355
÷ 52,501,085) x 100%
= 20.09% or 0.2009
 Operating Profit Margin
- measures the amount of income
generated from the core business of a
company.

OPERATING PROFIT MARGIN = (Operating Profit ÷ Sales) x 100%

= (4,048,696
÷ 52,501,085) x 100%
= 7.71% or 0.0771
 Net Profit Margin
- measures how much net profit a
company generates for every peso of
sales that it generates.

NET PROFIT MARGIN = (Net Profit ÷ Sales) x 100%

= (2,659,087
÷ 52,501,085) x 100%
= 5.06% or 0.0506
LIQUIDITY RATIOS
- measure the ability of a
company to pay maturing
obligations from its current assets.
CurrentRatio
Acid-Test Ration
or Quick Asset Ratio
 Current Ratio

CURRENT RATIO = Current Assets ÷ Current Liabilities

= 9,262,331 ÷ 7,819,461
= 1.18
 ACID-TEST Ratio or
QUICK ASSET Ratio
ACID-TEST RATIO = (Cash + Current Accounts Receivable +
Short-term Marketable Securities) ÷ Current Liabilities
= (1,062,527 + 2,300,500) ÷ 7,819,461
= 0.43

ACID-TEST RATIO = (Current Assets –

Inventories) ÷ Current Liabilities
LEVERAGE RATIOS
- show the capital structure of a
company.
- measures the company’s ability to
meet long-term obligations.
Debt ratio
Debt to equity Ratio
Interest Coverage Ratio
 Debt ratio
- measures how much of the
total assets are financed by
liabilities.

DEBT RATIO = Total Liabilities ÷ Total Assets

= 9,819,461 ÷ 22,298,020
= 0.44
 Debt to equity ratio

DEBT TO EQUITY RATIO = Total Liabilities ÷ Total Stockholders’ Equity

= 9,819,461 ÷ 12,478,559
= 0.79
 Interest Coverage Ratio
- provides information if a company
has enough operating income to
cover interest expense.

INTEREST COVERAGE RATIO = EBIT ÷ Interest Expense

= 4,048,696 ÷ 250,000
= 16.19
EFFICIENCY RATIOS/TURNOVER
RATIOS
Totalasset turn-over ratio
Fixed asset turn-over ratio
Accounts receivable turn-over ratio
Inventory turn-over ratio
Accounts payable turn-over ratio
 Total Asset Turnover Ratio
- measures the company’s ability to
generate revenues for every peso
of asset invested.

ASSET TURNOVER RATIO = Sales ÷ Total Assets

= 52,501,085 ÷ 22,298,020
= 2.35
 Fixed Asset Turnover Ratio

FIXED ASSET TURNOVER RATIO = Sales ÷ PPE

= 52,501,085 ÷ 12,200,000
= 4.30
Accounts Receivable Turnover Ratio
- measures the efficiency by which accounts
receivable are managed.

A/R TURNOVER RATIO = Sales ÷ A/R

= 52,501,085 ÷ 2,300,500
= 22.82
 Inventory Turnover Ratio
- measures the company’s ability to
generate revenues for every peso
of asset invested.

INVENTORY TURNOVER RATIO = COS ÷ Inventories

= 41,954,730 ÷ 4,849,304
= 8.65
 Accounts Payable Turnover Ratio
- measures the company’s ability to
generate revenues for every peso
of asset invested.

A/P TURNOVER RATIO = COS ÷ Accounts Payable

= 41,954,730 ÷ 5,050,810
= 8.31