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Analysis of Financial Performance based on Liquidity and Profitability Ratio

(Case Study on PT Unilever in period 2013-2017)

Article  in  International Journal of Engineering and Technology · December 2018

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 International Journal of Engineering & Technology, 7 (4.34) (2018) 214-216

International Journal of Engineering & Technology

Website: www.sciencepubco.com/index.php/IJET

Research paper

Analysis of Financial Performance based on Liquidity and

Profitability Ratio (Case Study on PT Unilever in period
2013-2017)
Muhammad Ali*, Diah Andari, Bunga Indah Bayunitri, Andry Ariffian, Sugiartiningsih

Widyatama University, Bandung, Indonesia

*Corresponding author E-mail: muhammad.ali@widyatama.ac.id

Abstract

This research method uses secondary data from PT Unilever's financial statements in the period 2013 to 2017, the final results of which
can be used for decision making for management or outside parties that have a need for the company. The purpose of this analysis is
carried out namely as a basis for making relevant decisions so that the company or interested parties have a minimum basis for decision
making. The results of this analysis indicate that the company is declared to be less liquid when viewed from the results of liquidity ratio
analysis based on theory, but stated either when viewed or compared with other leading companies. The results of the profitability ratio
analysis are above the industry average and in practice the company is indeed in a stable condition. To compare with theory and results
of conclusions based on practice, so that it can be assessed that companies use funds effectively and can be judged that the company is in
good condition.

Keywords: Liquidity; Profitability.

nal parties of the company and to measure the company's ability to

1. Introduction fulfill its obligations in obtaining profits, the authors want to know
about the performance of PT Unilever using liquidity ratio analy-
1.1. Research Background sis and profitability ratio.

Analysis of Financial Statements certainly has a very important 1.2. Problem Identification
role to process the financial statements of the company, so that
from the results of the calculation of the financial statements the From the above formula, the problems that will be taken in this
company can find out its weaknesses and strengths and know what scientific research are as follows:
steps should be taken from the results of the analysis. "Analysis of 1. What is the liquidity ratio at PT UNILEVER, TBK for 2013-
financial statements is an activity that aims to determine the health 2017?
condition of the company by analyzing the relationship of the 2. What is the profitability ratio at PT UNILEVER, TBK for
posts contained in the financial statements" [2]. Companies usual- 2013-2017?
ly analyze financial statements in a certain period using formulas
ratios including liquidity ratios and profitability ratios. 2. Theoretical Basis
Liquidity Ratio is a ratio that shows the level of the company's
ability to pay debts - short-term debt owned. If the company is
considered to have enough ability to meet its short-term obliga- 2.1. Financial Ratios
tions, then the company can be called liquid. According to [3],
liquidity ratio is a ratio that describes the company's ability to Ratio analysis is an analysis method to determine the relationship
meet short-term (debt) obligations. We recommend that if the of certain items in the balance sheet or income statement individu-
company is unable to meet its short-term obligations, the company ally or a combination of the two reports. Financial ratio analysis is
is said to be liquid. In addition to the liquidity ratio, financial rati- a general form or method used in the analysis of financial state-
os can also be measured using ratios. ments. Ratio analysis is useful for internal analysts to help man-
Profitability Ratios are used to measure financial statements that agement make evaluations of the results of its operations, correct
can describe a company's ability to generate profits over a certain errors and avoid situations that can cause financial difficulties.
period of time, Profitability is the relationship between revenues Financial ratio analysis according to [4] is: "Future oriented or
and costs generated by using the firm's assets- both current and future oriented, meaning that with financial ratio analysis can be
fixed-in productive activities. By using this profitability ratio, used as a tool to predict financial conditions and future results of
creditors can assess the development of companies that will be operations". With historical ratio figures or if possible with indus-
given credit in the future. try ratio numbers (which are supplemented with other data) can be
Based on the description above, it is explained that the Liquidity used as a basis for the preparation of projected financial state-
and Profitability Ratios are very important for internal and exter- ments which is one form of corporate financial planning.

Copyright © 2018 Authors. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium, provided the original work is properly cited.
International Journal of Engineering & Technology 215

“The financial ratio is a number obtained from the comparison of When the value of Current Ratio reaches 100% or equivalent to
one financial statement account with another account that has a the value of one, it means that the company has the ability to cover
relevant and significant relationship”. current debt with current assets with the same value. So, the great-
er the value of Current Ratio reflects the ability of companies that
Definition of financial ratio analysis according to [1], "This finan- are also getting bigger and able to cover current debt [2]. However,
cial ratio or financial ratio is very important for analyzing the if the results of the analysis are too large then the company is not
company's financial condition. Short and medium term investors good too, this is because the possibility of the company having
are generally more attracted to short-term financial conditions and assets that are less productive so that it affects income.
the company's ability to pay adequate dividends. This information From the graph, it can be seen that there is an increase and de-
can be known in a simpler way, namely by calculating the ratio of crease. There was a significant decline from 2014 to 2016 of
financial ratios in accordance with the wishes". 10.9%. This was due to an increase in current debt greater than the
current assets.
2.2. Liquidity Ratios
3.1.2. Cash Ratio
According to [2] states that "liquidity ratio is a ratio that describes
a company's ability to meet short-term (debt) obligations". This
means that if the company is billed, the company will be able to
fulfill the debt, especially the debt that is due. In other words, the
liquidity ratio functions to show or measure the company's ability
to fulfill its obligations that are due, both liabilities to outside par-
ties (business entity liquidity) and within the company (company
liquidity). Thus, it can be said that the usefulness of this ratio is to
determine the company's ability to finance and fulfill obligations
(debt) when billed.

The types of liquidity ratios that can be used by companies to

measure their capabilities are:
• Current Ratio
• Cash Ratio Fig. 2: Cash ratio
• Quick Ratio or Acid Test Ratio
The general industry standard for cash ratios is 50%. From the
The ideal value of the three analyzes should be around 150% to graph, it can be seen that there is an increase and decrease. There
reflect that the condition of the company is in good condition. was a significant decline from 2014 to 2016 of 6.3%. This was due
to an increase in current debt greater than its current assets. For
Table 1: Types of liquidity ratios [3] the standard cash ratio itself, in fact there is rarely that reaches
No. Item Industrial Standard 50%. This is because if the ratio is high, then the cash that is
1 Current Ratio 200% owned by the company is also high. If cash is too high, then the
2 Quick Ratio 150% possibility of cash is less or even unproductive in generating prof-
3 Cash Ratio 50%
its. So, most companies prefer to have standard cash or tend to be
relatively low, so that it can drive the company's operating capa-
2.3. Profitability Ratios bility or investment so that profits become higher and so on.
Profitability is a net result of a number of company policies and 3.1.3. Quick Ratio
decisions. Profitability ratios measure how much the company's
ability to generate profits.
• Profit Margin (Profit Margin on Sales)
• Net Profit Margin
• Net profit margin
• Operating ratio
• Return on Investment
• Return on Equity
• Return on Asset

3. Results and Discussion

3.1. Liquidity Ratio

Fig. 3: Quick ratio
3.1.1. Current Ratio
It is better if this ratio can reach 1: 1 or 100% because if liquida-
tion occurs then the company can pay its short-term liabilities
because the source used is fast assets that can be cashed. The ideal
value of the three analyzes should be around 150% to reflect that
the condition of the company is in good condition.
The results of the analysis show that the percentage of the quick
ratio (quick ratio) is below the industry average standard, which
means that companies are less able to pay short-term obligations
using more liquid assets. In fact, the company does not always pay
the current debt only uses these assets. If the results of the analysis
Fig. 1: Current ratio are too high or reach 100%, it is not good because it is worried
 216 International Journal of Engineering & Technology

that it will affect its income because the liquidity is too high and Net Profit Margin was 2.5% with a 1.4% increase in 2015 to 2016.
there are idle funds, so that the funds are not productive. In fact, the results of this analysis were appropriate and showed
the company was stable.
3.2. Profitability Ratio
3.2.4. Return on Equity
3.2.1. Gross Profit Margin
From the graph above, we can know that there was a decrease
from 2013 to 2015. This is because the increase in profit after tax
and interest is lower compared to the increase in equity. In 2015 to
2017, there was an increase which indicates an increase in Equity
greater than the increase in Profit after Tax and Interest. In fact,
the results of this analysis are appropriate and show the company
is stable.

3.2.5. Return on Investment

Fig. 4: Gross profit margin

From the graph, it can be seen that there is an increase and de-
crease. There was a decrease from 2013 to 2016. This was due to
the increase in sales from that year was lower than the increase in
sales then in 2017. There was an increase from the previous year
because the portion of increased sales affected the cost of goods
and then the cost of goods also increased. The general standard of
the industry average for profit margin is 30%, if it is above the
average then the profit margin of a company is good [3]. In fact, Fig. 7: Return on investment
the results of this analysis are appropriate and show the company
is stable. This industry standard ratio according to [3] is 30% where the
higher this ratio, the better the company's performance, especially
3.2.2. Net Profit Margin in returning the investment it gets.
From the graph, it can be seen that there is an increase and de-
crease, this graph shows that the comparison of the company's
profit from year to year decreases. This is due to a decrease in
profit margins due to low asset turnover.

4. Conclusion
Based on above analyze results of the study, the authors conclude
the results of the calculation of the ratio that has been explained in
the previous chapter as follows:
The results of this analysis indicate that the company is effective
in using its funds so that it is less likely that the company has idle
funds. Companies generally do not rely on one component to ful-
Fig. 5: Net profit margin
fill their obligations, so that it can be concluded that the company
is in a stable condition.
From the graph, it can be seen that there is an increase and de- The results of this analysis have to do with the results of the anal-
crease. There was a significant decline from 2013 to 2015 and ysis of liquidity ratios where funds owned by the company are
increased in 2016 and then declined again. This is due to the in- managed effectively, so that the company generates high profits
crease in costs and high taxes, as can be seen in the gross profit even the results of this analysis indicate that it is above the exist-
margin section. The ratio that is generated is still in the range of ing industry standards. It can be concluded that the company is in
49% to 50%, which is still far from the industry average. Industry a stable condition in generating profits, both from operating activi-
Standard for this Ratio is 20% [2]. In fact, the results of this analy- ties and investment activities.
sis are appropriate and show the company is stable.

3.2.3. Return on Assets References

[1] Fahmi, I. (2012). Analisis laporan keuangan. Alfabeta.
[2] Kasmir. (2014). Analisis laporan keuangan. Rajawali Pers.
[3] Kasmir. (2008). Analisis laporan keuangan. Raja Grafindo Persada.
[4] Munawir. (2010). Analisis laporan keuangan. Liberty.

Fig. 6: Return on asset

Based on the graph above, there is a significant decrease without a

high increase, this is because the increase in profit after tax is
higher than the increase in assets every year. The total decrease in

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