StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Pulp, Paper and Paperboard, Inc. ratio analysis - Essay Example

Cite this document
Summary
The activity ratios are however on a decreasing trend. Though the inventory turnover ratio improved in the year 2010, it fell in 2011…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.7% of users find it useful
Pulp, Paper and Paperboard, Inc. ratio analysis
Read Text Preview

Extract of sample "Pulp, Paper and Paperboard, Inc. ratio analysis"

Pulp, Paper and Paperboard, Inc. Ratio analysis Financial ratios for the year ended December Liquidity ratios Current ratio = current assets/ current liabilities= 575000/345000=1.667Quick ratio= (current assets – inventory)/ current liabilities=332000/345000=0.962Activity ratiosInventory turnover= cost of goods sold /inventory =1701000/ 243000= 7 times Average collection period = (debtors/ net credit sales)* 365=(237000/ 2080976)*365=41.57 days (assuming that all sales are made on credit)Total assets turn over = sales/ total assets= 2080976/1000000= 2.

081Debt ratiosDebt ratio= total debt/ total assets = 533000/ 1000000= 0.533Times interest earned= income before interest and tax/ interest expense =106130/19296=5.5Profitability ratiosGross profit margin= (gross income/sales)*100= (379976/2080976)*100= 18.25 %Operating profit margin = (operating profit/ sales)*100(106130/2080976)*100= 5.1%Net profit margin = (Net income/sales)*100= (52024/2080976)*100= 2.45% Return on total assets = (net income/average total assets)*100= (52024/1000000)*1005.2024%Return on equity = (net income/average shareholders’ equity)*100= (52024/467000)*100=11.

14 %The following table therefore summarizes the company’s ratios from the year 2009 to the year 2011 and the industry’s ratios for the year 2011 Ratio 2009 2010 2011 2011__________________________________________________________________Current Ratio 1.6 1.7 1.667 1.6Quick Ratio 0.9 1.0 0.962 0.9Inventory Turnover 8.1 9.3 7.0 8.4Average Collection Period 33 days 37 days 41.

57 days 39 daysTotal Asset Turnover 2.3 2.2 2.081 2.2Debt Ratio 60% 56% 53.3% 58%Times Interest Earned 2.5 3.5 5.5 2.3Gross Profit Margin 21% 19.7% 18.25 % 20.4%Operating Profit Margin 4.7% 4.8% 5.1% 4.7%Net Profit Margin 1.8% 1.6% 2.45% 1.4%Return on total assets 4.1% 3.5% 5.202% 3.08%Return on Equity 10.3% 7.9% 11.14% 7.

3%Time series analysis The company’s liquidity ratios have an averagely increasing trend, an indication of improving ability to meet ‘short-term’ obligation. The activity ratios are however on a decreasing trend. Though the inventory turnover ratio improved in the year 2010, it fell in 2011. Average collection period and asset turnover performance constantly worsened with the years. The debt ratios uniformly improved across the years. While the gross profit margin decreased with time, operating profit margin and net profit margin improved with time.

Return on total assets and return on equity also had an averagely increasing trend with a slight decline in the year 2009. The company’s ration therefore, on the average, indicates an improving trend in its financial position.Cross sectional analysis The company’s ratios for the year 2011, apart from activity ratios and gross profit margin, are above the industry’s average. This means that the company’s financial position is averagely above that of the industry. Limitation of ratio analysisOne of the challenges of financial ratios is the difference between the net book values of balance sheet values of items and the market value.

This discredits computed ratios. Diversity of organizations into different industries also makes it difficult for cross sectional analysis. Changes in economic trends such as seasonality and inflation also challenges application of ratio analysis due to changing values in commodities (Brigham and Houston, p. 120, 121). Cautions that must be taken when reviewing cross sectional and time series ratio analysisProper care should be taken when calculating ratios. This is because negligence may result in misleading information (Moyer, McGuigan, Rao and Kretlow, p. 93, 94).Works citedBrigham, Eugine, and Houston, Joel.

Fundamentals of Financial Management. Mason, OH: Cengage Learning, 2012. Print Moyer, Moyer, McGuigan, James, Rao, Ramesh, and Kretlow, William. Contemporary Financial Management. 12th Ed. New York, NY: Cengage Learning, 2012. Print

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Pulp, Paper and Paperboard, Inc. ratio analysis Essay”, n.d.)
Pulp, Paper and Paperboard, Inc. ratio analysis Essay. Retrieved from https://studentshare.org/miscellaneous/1596704-pulp-paper-and-paperboard-inc-ratio-analysis
(Pulp, Paper and Paperboard, Inc. Ratio Analysis Essay)
Pulp, Paper and Paperboard, Inc. Ratio Analysis Essay. https://studentshare.org/miscellaneous/1596704-pulp-paper-and-paperboard-inc-ratio-analysis.
“Pulp, Paper and Paperboard, Inc. Ratio Analysis Essay”, n.d. https://studentshare.org/miscellaneous/1596704-pulp-paper-and-paperboard-inc-ratio-analysis.
  • Cited: 0 times

CHECK THESE SAMPLES OF Pulp, Paper and Paperboard, Inc. ratio analysis

Financial Analysis of Creditworthiness and Ratios

The researcher of this paper claims that there remains no replacement for keen and tough analysis of the creditor's financial reports when trying to estimate a creditor's creditworthiness.... Where probable and allowed lawfully, in the issue of minor organizations with solitary owners where own assurances will remain needed, a past borrowing analysis must be to estimate the personal data of satisfying their financial responsibilities.... With a view of interpreting financial proportions and behaviors, the loan analyst will look into the important ratio combinations to estimate creditor behaviors and factors that can influence creditworthiness....
8 Pages (2000 words) Term Paper

Ratio Analyzes of Marks & Spencer Company

Accounting and ratio analysis are two keys to successful interpretation and financial decision making.... This paper analyzes the role of accounting within the organization and discusses the ratio analysis.... ratio analysis is basically analyzing the relationship between different sections of the various financial statements and this analysis is based on a comparison.... ratio analysis can be of two kinds: Comparative Analysis in which the ratios are compared with the industry average ratios and Trend Analysis in which the ratios of the same company are compared on a periodic basis i....
11 Pages (2750 words) Research Paper

PATIENT TO NURSE RATIO IN HOSPITALS

The first article bears the title “Patient to Nurse ratio and Risk of Ventilator-Associated Pneumonia in Critically Ill Patients” and is… (2011).... The primary objective of the article is to establish how the ratio of patients to nurses (PNR) affects patients' risk of getting ventilator-linked pneumonia.... The conclusion, therefore, was that even though a 1:1 ratio is associated with a reduced risk of ventilator-linked pneumonia, adjustment of the variables reduces the significance of the difference....
4 Pages (1000 words) Research Paper

Yum Brands Incorporated

Brands, Inc. analysis of financial statements of an entity give a clear insight of the nature of entity, its performance, It provides awareness to the investors in that guide them in making important investment decisions.... The analysis of the firm will reveal its financial background, operating efficiency, liquidity position, and profitability, going concern, and capital structure and gearing position.... Industry analysis facilitates the understanding of the operating environment, identification of external threats and opportunities for investment, analysis of trends within the industry and the general performance of the industry....
7 Pages (1750 words) Research Paper

An Overview of Cedar Fair

is managed by the Cedar Fair Management, inc.... The Cedar Fair Management, inc.... took place in Sandusky, Ohio.... As a publicly traded Delaware limited partnership, Cedar Fair, L.... .... is the general partner and has its shares held by an Ohio trust.... hellip; is among the largest amusement park operators in the world and has its operations in Canada and United States....
10 Pages (2500 words) Term Paper

The Return on Assets and Roe, the Return on Sales, and Liquidity of Apple Inc

This is due to 85% increase the company's profits resulting from sharp The paper "The Financial ratio analysis of Apple, Inc" is a great example of a case study on finance and accounting.... The financial ratio analysis of Apple, Inc.... In a similar manner, the value of another ratio - Profit before Taxes / Total Assets has also shown improvement from a value of 25.... The company's P/E ratio has also remained healthy despite the decline since 2009, the company's stock still trading at high P/E values over the industry average of 13....
3 Pages (750 words) Term Paper

Paper Cups versus Foam Cups

The purpose of this paper is to analyze the cup that relays more benefits to the environment conservation efforts among other benefits that can be derived by the users between paper and foam cups.... The paper will use the different stages the two types of cups go through in the analysis of the environmental impacts.... The paper enumerates the different stages in the production of the cups.... The debate on form and paper cups has been ongoing for some time without a clear demonstration on the better cup for environmental conservation efforts....
15 Pages (3750 words) Term Paper

Liquidity Ratio, Current Ratio, Leverage Ratios and Total Debt Ratio of Aspen Industries

Debt ratio analysis is considered a solvency ratio that brings out the total liabilities of a firm as a percentage of the total assets that the firm has.... Debt ratio analysis is considered a solvency ratio that brings out the total liabilities of a firm as a percentage of the total assets that the firm has.... In this analysis, it shows that companies that have large amounts of current assets will more easily be able to pay off the current liabilities when they become due without the need to selloff the long term assets....
2 Pages (500 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us