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    Ratio Case Study - Standfornd Yard Mon Sec Summer 2021

    Uploaded by

    Muhammad Ali Samar
    Stortford Yachts Limited's financial performance and ratios are analyzed for 2015-2017. Key points: 1) Return on equity declined drastically from 98% to 40% due to a 15% drop in net income despite equity rising 40%, indicating rising costs are hurting profits. 2) Liquidity is marginally below industry average but strengthened in 2017, though debtor days increased significantly, suggesting improved stock but not credit control. 3) Return on assets declined from 12% to 9%, below industry average of 26%, as profits fell while assets rose, meaning capital investment is not generating sufficient returns. 4) Sales to receivables averaged 4x and inventory turnover averaged 8.5

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    Ratio Case Study - Standfornd Yard Mon Sec Summer 2021

    Uploaded by

    Muhammad Ali Samar
    31 views8 pages
    Stortford Yachts Limited's financial performance and ratios are analyzed for 2015-2017. Key points: 1) Return on equity declined drastically from 98% to 40% due to a 15% drop in net income despite equity rising 40%, indicating rising costs are hurting profits. 2) Liquidity is marginally below industry average but strengthened in 2017, though debtor days increased significantly, suggesting improved stock but not credit control. 3) Return on assets declined from 12% to 9%, below industry average of 26%, as profits fell while assets rose, meaning capital investment is not generating sufficient returns. 4) Sales to receivables averaged 4x and inventory turnover averaged 8.5

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    Stortford Yachts Limited's financial performance and ratios are analyzed for 2015-2017. Key points: 1) Return on equity declined drastically from 98% to 40% due to a 15% drop in net income despite equity rising 40%, indicating rising costs are hurting profits. 2) Liquidity is marginally below industry average but strengthened in 2017, though debtor days increased significantly, suggesting improved stock but not credit control. 3) Return on assets declined from 12% to 9%, below industry average of 26%, as profits fell while assets rose, meaning capital investment is not generating sufficient returns. 4) Sales to receivables averaged 4x and inventory turnover averaged 8.5

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    31 views8 pages

    Ratio Case Study - Standfornd Yard Mon Sec Summer 2021

    Uploaded by

    Muhammad Ali Samar
    Stortford Yachts Limited's financial performance and ratios are analyzed for 2015-2017. Key points: 1) Return on equity declined drastically from 98% to 40% due to a 15% drop in net income despite equity rising 40%, indicating rising costs are hurting profits. 2) Liquidity is marginally below industry average but strengthened in 2017, though debtor days increased significantly, suggesting improved stock but not credit control. 3) Return on assets declined from 12% to 9%, below industry average of 26%, as profits fell while assets rose, meaning capital investment is not generating sufficient returns. 4) Sales to receivables averaged 4x and inventory turnover averaged 8.5

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Stortford Yachts Limited

    Income Statement $m $m $m
    2015 2016 2017 % Change
    Net Sales 4.90 5.30 6.60
    Operating costs 4.17 4.43 5.82
    Operating profit before tax 0.73 0.87 0.78
    (EBT)
    Taxation 0.24 0.30 0.27
    Profit after tax (PAT) 0.49 0.57 0.51
    Dividends 0.12 0.16 0.16
    Retained profit 0.37 0.41 0.35
    No. Shares Outstanding 0.15 0.15 0.15
    Cash Flow 0.70 0.76 0.73
    Price (US$/Share) 75.00 80.00 65.00

    Stortford Yachts Limited

    Ratio 2015 2016 2017

    ROE - NI/Share Holder Equity

    98% 63% 40%

    Return on Capital Employed

    18% 18% 15%

    Return on Asset

    12% 12% 9%
    Net profit margin 10% 11% 8%
    Operating Margin 15% 16% 12%
    Asset turnover 1.21 1.13 1.23
    Current ratio 1.23 1.22 1.31
    Acid test ratio/ Quick Ratio 1.30 1.56 2.17
    Working Capital Ratio 0.31 0.35 0.59
    Debt Ratio 54% 47% 41%
    Interest Coverage Ratio
    Debt to Equity ratio 442% 243% 175%
    Asset Turnover 1.21 1.13 1.23
    Recievable Turnover 4.30 4.02 3.59
    Debtors collection period 84.92 90.91 101.76
    Inventory Days 42.89 45.32 37.63
    Inventory Turnover 8.51 8.05 9.70
    Payable Turnover 3.09 2.84 3.06
    Payable Days 118.17 128.53 119.16
    Coversion Cycle 10 8 20
    Price to Earnings Ratio (P/E)
    Price to Book Value (P/B)
    Dividend Yield
    Debtors collection period
    Stortford Yachts Limited
    Balance Statement

    Fixed assets
    Current assets:
    Finished Goods Inventory

    Debtors (A/c Receivable)


    Cash and Bank
    Total Current Asset
    Total Assets
    Total Liabilities & Equity
    Account Payable
    Bank loans
    Total Liabilities

    Capital and reserves

    Total Liabilities & Equity

    Industry
    Formulas
    2017

    26.00% NI/Share Holder Equity

    Net Income/Capital Employed (Total Liabilities +


    26% Shareholder Equity)

    15%

    14.50% NI (PAT) / Net Sales


    operating profit / Net Sales
    1.79X Net Sales / TotalAsset
    1.5x Current asset /Current Liabilities
    1.03x (Current Asset-Inventory)/Current Liabilties
    CA-CL
    32.00% (Bank Loan) debt / total asset
    Total Debt/Total Equity
    1.79x Net Sales/Total Assets
    4.40x Net Sales / Recievables
    83 days
    40 days 365 days / Inventory Turnover
    (Operating Cost)COGS / Finished Good Inventory
    COGS/Current Liabilities
    365/Payable Turnover
    DSO + Inventory Days -Payable Days
    9.00x Price per share / Earning per share
    Price per Share / Capital per share
    4% DPS/ price
    32.00% 365 days/ Recievable Turnover

    how to do ratio an
    $ mn $ mn $ mn
    2015 2016 2017
    2.4 2.77 2.88

    0.49 0.55 0.60


    1.14 1.32 1.84
    0.03 0.04 0.05
    1.66 1.91 2.49
    4.06 4.68 5.37

    1.35 1.56 1.90


    2.21 2.21 2.21
    3.56 3.77 4.11

    0.50 0.91 1.26

    4.06 4.68 5.37

    Explanation

    Return on Equity has drastically decreased over the period of time due to 15%
    decrease in NI where as Equity has Increased by 40% . There is some evidence
    that the problem that maybe cost controlled with their operating cost has a
    percentage of sales increasing significantly in 2017 and also capital investment is
    also rising therefore company needs to decrease their operational cost to
    enhance profitability

    ROE has drastically decreased over the period of time due to 15% decrease in NI;
    whereas, equity increases by 40%. There is some evidence that the problem may
    be cost control with their operating costs as a % of sales increasing significantly
    in 2017 and capital investment is also rising. Therefore, company needs to
    decrease their operational cost to enhance profitability

    ROA has been declining in 2017 from 12% to 9% where as its also below the
    indeustry average means company is not generating sufficient profit on their
    invested capital addition in asset will have negative impact of profitability
    because of the higher operating cost per asset

    sound level of liquidity, though are marginally below the desired level and a little
    below the industry average. However, liquidity is strengthened in 2017 and this
    could indicate improved stock control or improved credit control. However, the
    latter is unlikely as the debtor collection period has increased significantly.
    our asset keeps increasing but there is no debt to counter it therefore our debt ratio keeps on reducing
    in comparison to assets you have how much sales are you doing or how your assets impact your sales
    Avg 4x Sales w.r.t Recievables

    almost 40 days required to convert inventory into sales


    Avg 8.5x Op cost w.r.t Inventory
    Avg 2.99x Op cost w.r.t Payables

    how to do ratio analysis 4 points to be discussed in every ratio

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