Table of Content

SL.NO. Topic Page No.

01. Executive Summary 05.

02. Introduction 06.

03. Objectives 07.

04. Methodology 08.

05. Limitation 09.

06. Literature View 10-17.

07. Findings and Analysis 18-25.

08. Recommendation and Conclusion 26.

09. Bibliography 27.

10. Appendix 28-51.

 Executive Summary:
The name of my assigned manufacturing company is Fu-Wang Foods Limited which is one of
the profitable and leading companies of Fu-Wang group producing and marketing of food item
which include Bread, Cake etc. I can use Fu-Wang Foods company’s ratios to perform a
complete ratio analysis using Time-series analysis approach. The DuPont system of analysis is
used to dissect the firm’s financial statements and to assess its financial condition. It merges the
income statement and balance sheet into two summary system of profitability. The overall
liquidity of the firm seems to exhibit a reasonably stable trend, having been maintained at a level
that is relatively consistent. The firm’s liquidity seems to be good. Fu-Wang Foods inventory
appears to be in good shape. Its inventory management seems to have improved. The firm may
be experiencing some problems with accounts receivable. The average collection period seems to
be good. Fuwang Foods‘s indebtedness increased over the 2008-2010 period. Although this
increase in the debt ratio could be cause for alarm, the firm’s ability to meet interest and fixed
payment. Investors have greater confidence in the firm in 2007-08 than in the prior one year. The
P/E ratio suggests that the firm’s risk has declined.

 Introduction:

2
The name of my assigned manufacturing company is Fu-Wang Foods Limited which is one of
the profitable and leading companies of Fu-Wang group producing and marketing of food item
which include Bread, Cake etc. In this term paper, we are assigned to identify and evaluate the
overall financial performance of Fu-Wang Foods including the calculation of the Liquidity, debt,
activity, Profitability and market ratio. Moreover, I have suggested finding out the financial
position of Fu-Wang Foods and their convenient business performance in future. The financial
structure of the company has been analyzed through calculating the ratios and explaining the
condition found from the calculation of those ratios.

 Objectives:

3
Objectives of our term paper are given below:

1. Identifying the present financial conditions of the company.

2. Showing the overview of the policies provided by the company.

3. Analyzing the numerical data of the firm by using some statistical measures.

4. Identifying the financial health through ratio analysis.

5. Facilitating the comparison of the overall financial conditions of the firm with a time
serious analysis. Comparison is based on both subjective and numerical analysis.

 Methodology:

4
  Summary Analysis: I can use Fu-Wang Foods company’s ratios to perform a
complete ratio analysis using Time-series analysis approach. Those ratios are
summarized in Table 1.1, which also shows the formula used to calculate each
ratio. Using those data, I can discuss the five key aspects of Fu-Wang Food’s
performance- liquidity, activity, debt, profitability and market.

 DuPont System of Analysis: The DuPont system of analysis is used to dissect

the firm’s financial statements and to assess its financial condition. It merges the
income statement and balance sheet into two summary system of profitability:
return on asset (ROA) and return on common equity (ROE). Figure 2.2 depicts
the basic DuPont system with Fu-Wang Foods Company’s 2006-2010 monetary
and ratio values. The upper portion of the chart summaries the income statement
activities; the lower portion summaries the balance sheet activities.

 Time Serious Analysis: Time serious analysis evaluates performance over time.
Comparison of current to past performance, using ratios, enables analysts to
assess the firm’s progress.

 Limitation:

5
 Due to time constraints we could not visit the premise of Fu-Wang Foods ltd corporate
more recent information and views of the Top Management about the performance &
position of the company.

 I have copied the financial data of the Fu-Wang Foods from the DSE library. But some
data were missing in those statements.

 Literature View:

 Ratio Analysis: Ratio Analysis is a form of Financial Statement Analysis that is

used to obtain a quick indication of a firm's financial performance in several key
areas. The ratios are categorized as Short-term Solvency Ratios, Debt

6
 Management Ratios, Asset Management Ratios, Profitability Ratios, and Market
Value Ratios.

 Liquidity Ratios: Short-term Solvency Ratios attempt to measure the ability of a

firm to meet its short-term financial obligations.

1. Current Ratio: The Current Ratio is calculated by dividing Current Assets by Current
Liabilities. Current Assets are the assets that the firm expects to convert into cash in the
coming year and Current Liabilities represent the liabilities which have to be paid in cash
in the coming year.

2. Quick Ratio: This ratio attempts to measure the ability of the firm to meet its obligations
relying solely on its more liquid Current Asset accounts such as Cash and Accounts
Receivable. This ratio is calculated by dividing Current Assets less Inventories by
Current Liabilities.

7
  Debt Management Ratios: Debt Management Ratios attempt to measure the firm's use
of Financial Leverage and ability to avoid financial distress in the long run. These ratios
are also known as Long-Term Solvency Ratios.

1. Debt Ratio: The Debt Ratio, Debt-Equity Ratio, and Equity Multiplier are
essentially three ways of looking at the same thing: the firm's use of debt to
finance its assets. The Debt Ratio is calculated by dividing Total Debt by Total
Assets. The Debt-Equity Ratio is calculated by dividing Total Debt by Total
Owners' Equity. The Equity Multiplier is calculated by dividing Total Assets by
Total Owners' Equity.

2. Times Interest Earned Ratio: The times interest earned ratio, sometimes called
the interest coverage ratio, measures the firm’s ability to make contractual interest
payments. The higher its value, the better able the firm is to fulfill its interest
obligations. The times interest earned ratio is calculated as follows:

Times interest earned ratio = Earnings before interest and tax / Interest.

 Activity Ratio: Activity ratio measure the aped with which various accounts are
converted into sales or cash- inflows or out flows

8
 1. Inventory Turnover Ratio: Inventory turnover commonly measures the activity, or
liquidity of a firm’s inventory. It is calculated by as follows:

2. Average Collection Period: The average collection period or average age of accounts
receivable, is useful in evaluating credit and collection policies. It is arrived at by
dividing the average daily sales into the accounts receivable balance.

Average Collection Period = Accounts Receivable / sales * 365

3. Average Payment Period: The average payment period or average age of accounts
payable is calculated in the same manner as the average collection period:

Average Payment Period = Accounts payable/ Purchase * 365

4. Total Asset Turnover Ratio: The total asset turnover indicates the efficiency with which
the firm uses its asset to generate sales. Total asset turnover is calculated as follows:

Total Asset Turnover = sales/ Total Asset.

 Profitability Ratio: There are many measures of profitability. As a group, these

measures enable analysts to evaluate the firm’s profits with respect to a given level of
sales, a certain level of assets or the owner’s investment.

9
 1. Gross Profit Margin: The gross profit margin measures the percentage of each sales
dollar remaining after the firm has paid for its goods. The gross profit margin is
calculated as follows:

Gross Profit Margin = Gross profit/ sales * 100

2. Operating Profit Margin: The operating profit margin measures the percentage of each
sales dollar remaining after all costs and expenses other than interest, taxes and preferred
stock dividends are deducted. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit/ sales * 100

3. Net Profit Margin: The net profit margin measures the percentage of each sales dollar
remaining after all costs and expenses, including interest, taxes and preferred stock
dividends, have been deducted. The net profit margin is calculated as follows:

Net profit Margin = Earnings available for common stockholders/ sales * 100

4. Earnings per Share (EPS): The firm’s earnings per share are generally of interest to
present or prospective stockholders and management. Earnings Per Share is calculated as
follows:

Earnings per Share (EPS) = Earnings available for common stockholders/ no. of common stock
outstanding.

5. Return on Total Asset (ROA): The return on total assets, often called the return on
investment measures the overall effectiveness of management in generating profits with
its available assets. The return on assets is calculated as follows:

Return on Asset (ROA) = Earnings available for common stockholders/ Total assets.

10
 6. Return on Common Equity (ROE): The return on common equity measures the return
earned on the common stockholders’ investment in the firm. The return on common
equity is calculated as follows:

Return on common equity = Earnings available for common stockholders/ common stock equity.

 Market Ratio: Market ratio relate the firm’s market value, as measured by its current
share price, to certain account values. These ratios give insight into how well investors in
the marketplace feel the firm are doing in terms of risk and return.

1. Price/ Earnings (P/E) Ratio: The price/earnings ratio is commonly used to assess the
owner’s appraisal of share value. The price earnings ratio is calculated as follows:

Price/ Earnings (P/E) Ratio = Market price per share of common stock/ Earnings per Share.

2. Market/Book (M/B) Ratio:

The market book ratio provides an assessment of how investors view the firm’s performance. It
relates the market value of the firm’s shares to their book- strict accounting- value. To calculate
the firm’s M/B ratio, we first need to find the book value per share of common stock:

Book value per share of common stock = Common stock equity/ No. of common stock
outstanding.

Market/ Book Ratio = Market price per share of common stock/ book value per share of common
stock.

11
  DuPont System of Analysis:

The DuPont system of analysis is used to dissect the firm’s financial statements and to assess its
financial condition. It merges the income statement and balance sheet into two summary system
of profitability: return on asset (ROA) and return on common equity (ROE).

12
  DuPont Formula: The DuPont system first brings together the net profit margin, which
measures the firm’s profitability on sales, with its total asset turnover, which indicates
hoe efficiently the firm has used its assets to generate sales. In the DuPont formula, the
product of these two ratios results in the return on total assets (ROA)

ROA = Net profit margin * Total asset turnover.

Substituting the appropriate formula into the equation and simplifying results in the formula
given earlier:

ROA = Earnings available for common stockholders/ sales * sales/ Total asset = Earnings
available for common stockholders/ Total asset.

 Modified DuPont Formula: The second step in the DuPont system employs the
modified DuPont formula. This formula relates the firm’s return on asset to its return on
common equity. The latter is calculated by multiplying the return on total assets by the
financial leverage multiplier (FLM), which is the ratio of total assets to common stock
equity:

ROE = ROA * FLM

Substituting the appropriate formulas into the equation and simplifying results in the formula
given earlier:

ROE = Earnings available for common stockholders/ Total assets * Total Assets/ common stock
equity = Earnings available for common stockholders/ common stock equity.

13
 Findings and Analysis:

Liquidity Ratio

1. Current Ratio:

2006 2007 2008 2009 2010

14
 1.11 1.33 1.24 0.99 0.99

Generally, the higher the current ratio, the more liquid the firm is considered to be. A current ratio 2.0 is
occasionally cited as acceptable. But a value’s acceptability depends on the industry in which the firm
operates.

2. Quick Ratio:

2006 2007 2008 2009 2010

0.73 0.93 0.80 0.72 0.75

A quick ratio of 1.0 or greater is occasionally recommended, but as with the current ratio, what vale is
acceptable depends largely on the industry. The quick ratio provides a better measure of overall liquidity
only when a firm’s inventory cannot be easily converted into cash. If inventory is liquid, the current ratio
is a preferred measure of overall liquidity.

Debt Ratio:

1. Debt Ratio:

2006 2007 2008 2009 2010

15
 42.51% 39.28% 43.46% 46.71% 47.94%

This Value indicates that the company has financed close to half of its assets with debt. The higher this
ratio, the greater the firm’s degree of indebtedness and the more financial leverage it has.

2. Times interest earned ratio:

2006 2007 2008 2009 2010

3.50 Times 1.75 Times 2.27 Times 2.69 Times 4.83 Times

The value of at least 3.0- and preferably closer to 5.0- is often suggested.

 Activity Ratio:

1. Inventory Turnover Ratio:

2006 2007 2008 2009 2010

5.10 Times 4.70 Times 4.54 Times 6.22 Times 7.15 Times

The resulting turnover is meaningful only when it is compared with that of other firms in the same
industry or to the firm’s past inventory turnover. An inventory turnover of 20.0 would not be unusual for
a grocery store, whereas a common inventory turnover for an aircraft manufacturer is 4.0.

2. Average Age of Inventory:

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 2006 2007 2008 2009 2010

71.51 Days 77.81 Days 80.45 Days 58.65 Days 51.05 Days

This vale can also be viewed as the average number of day’s sales inventory.

3. Average Collection Period:

2006 2007 2008 2009 2010

72.93 Days 43.89 Days 55.52 Days 40.38 Days 40.14 Days

The average collection period is meaningful only in relation to the firm’s credit terms. If the company had
extended 60 day credit terms, it it quiet acceptable.

4. Average Payment Period:

2006 2007 2008 2009 2010

154.75 Days 27.59 Days 83.56 Days 52.31 Days 124.46 Days

The figure is meaningful only in relation to the average credit terms extended to the firm. If Fu-Wang
Company has extended, on average, 30day credit terms, analyst would give Fu-Wang foods a low credit
rating.

5. Total Asset Turnover Ratio:

17
 2006 2007 2008 2009 2010

0.98 Times 0.93 Times 0.93Times 1.09 Times 0.99 Times

Generally, the higher a firm’s total asset turnover, the more efficiently its assets have been used. This
measure is probably of greatest interest to management, because it indicates whether the firm’s operations
have been financially efficient.

 Profitability Ratio:

1. Net Profit Margin:

2006 2007 2008 2009 2010

7.33% 3.73% 3.67% 4.13% 4.97%

The net profit margin is a commonly cited measure of the firm’s success with respect to earnings on sales.
A net profit of 1% or less would not be unusual for a grocery store, whereas a net profit margin of
10%would be low for a retail jewelry store.

2. Operating Profit Margin:

2006 2007 2008 2009 2010

11.04% 6.54% 6.42% 5.79% 6.98%

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 3. Gross Profit Margin:

2006 2007 2008 2009 2010

22.04% 18.53% 17.54% 16.74% 17.53%

4. Return on Asset ( ROA)

2006 2007 2008 2009 2010

7.21% 3.47% 3.41% 4.50% 4.94%

5. Return on Common Equity:

2006 2007 2008 2009 2010

12.55% 5.71% 6.03% 8.44% 9.50%

6. Earnings Per Share (EPS):

2006 2007 2008 2009 2010

1.50 0.70 0.77 1.17 1.33

19
The figure represents the dollar amount earned on behalf of each outstanding share of common stock. The
dollar amount of cash actually distributed to each shareholder is the dividend per share. EPS is closely
watched by the investing public and is considered an important indicator of corporate success.

 Market Ratio:

1. Price/ Earnings (P/E) Ratio:

2006 2007 2008 2009 2010

7.2 18.86 29.87 37.2 46.09

2. Market/ Book Ratio:

2006 2007 2008 2009 2010

0.91 1.07 1.81 3.13 4.71

 DuPont Analysis:

2006 2007 2008 2009 2010

7.18% 3.47% 3.41% 4.50% 4.92%

20
  Analysis:

1. Liquidity: The overall liquidity of the firm seems to exhibit a reasonably stable trend, having
been maintained at a level that is relatively consistent. The firm’s liquidity seems to be good.

2. Activity: Fu-Wang Foods inventory appears to be in good shape. Its inventory management
seems to have improved. The firm may be experiencing some problems with accounts receivable.

21
 The average collection period seems to be good. Fu-Wang foods also appear to be show in paying
its bill; it pays nearly 30 days slower than the industry average. This could adversely affect the
firm’s credit standing. Although overall liquidity appears to be good, the management of
receivable and payable should be examined. Fuwang’s total asset turnover reflects a decline in the
efficiency of total asset utilization.

3. Debt: Fuwang Foods‘s indebtedness increased over the 2008-2010 period. Although this increase
in the debt ratio could be cause for alarm, the firm’s ability to meet interest and fixed payment.
The firm’s indebtedness in 2008 apparently caused a determination in its ability to pay debt
adequately.

4. Profitability: Fu Wang foods’ profitability relative to sales in 2009 was better than the average
company in the industry, although it did not match the firm’s 2007-2008 performance. Although
the gross profit margin was better in 2006 and 2007 than in 2008-10. Higher levees of operating
and interest expenses in 2006-07 appear to have caused the 2008-10 net profit margins to fall
below that of 2008-10. However, fuwang foods’s net profit margin is quite favorable.

The firm’s earnings per share return on total assets, and return on common equity behaved much
as its net profit margin. The exceptionally high 2010 level of return on common equity suggests
that the firm is performing quite well.

5. Market: Investors have greater confidence in the firm in 2007-10 than in the prior one year. The
P/E ratio suggests that the firm’s risk has declined. The firm’s M/B ratio has decreased over the
2007-2010. This implies that investors are pessimistic about the firm’s future performance. The
P/E and M/B ratios reflect the firm’s increased profitability over the 2006-10 period. Investors
expect to earn high future returns as compensation for the firm’s above- average risk.

6. DuPont Analysis: The value is the same as that calculated directly in an earlier section. The
DuPont formula enables the firm to break down its return into profit-on sales and efficiency-of-
asset-use components.

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  Recommendations and Conclusions:

In summary, the firm appears to be growing and recently undergone an expansion in assets, financed
primarily through the use of debt. The 2008-2009 periods seems to reflect a phase of adjustment and
recovery from the rapid growth in assets.

23
 Bibliography:

1. Principles of Managerial Finance by Lawrence J. Gitman (Chapter-2: Page-44 to 77).

2. The financial statement of Fu-Wang Foods Limited.
3. Through Internet.

24
 Appendix- ( Ratio Analysis):

For 2006

 Liquidity Ratio:

1. Current Ratio = Current Asset/ Current Liability

= 179, 308, 689/ 162, 245, 857
= 1.11

25
 2. Quick Ratio = Current Asset – Ending Inventory / Current Liability
= 179, 308, 689 – 59, 829, 027
= 0.73

 Debt Ratio:

1. Debt Ratio = Total Liability/ Total Asset

= 162, 245, 857/ 381, 656, 927
= 42.51%

2. Times Interest Earned Ratio = EBIT/ Interest

= 39, 340, 746/ 11, 234, 642
= 3.50 Times.

 Activity Ratio:

1. Inventory Turnover Ratio = COGS/ Average Inventory

= 292, 626, 507/ 57, 328, 745
= 5.10 Times.

2. Average Age of Inventory = Average Inventory/ COGS *365

= 57, 328, 745/ 292, 626, 507 * 365
= 71.51 days.

3. Average Collection Period = A/C Receivable/ Sales *365

= 74, 995, 971/ 375, 354, 679 *365
= 72.93 days.

26
 4. Average Payment Period = Accounts Payable/ Purchase *365
= 83, 952, 431/ 198, 015, 189 *365
= 154.75 days.

5. Total Asset Turnover Ratio = Sales/ Total Asset

= 375, 354, 679/ 381, 656, 927
= 0.98 Times.

 Profitability Ratio:

1. Net Profit Margin = Earnings Available for Common Stockholders/

Sales *100
= 27, 538, 522/ 375, 354, 679
= 7.33%

2. Gross Profit Margin = Gross Profit/ Sales * 100

= 82, 728, 172/ 375, 354, 679 * 100
= 22.04%

3. Operating Profit Margin = Operating Profit/ Sales * 100

= 41, 439, 157/ 375, 354, 679
= 11.04%

4. Return on Asset ( ROE ) = Earnings Available for common

Stockholders/ Total Asset * 100
= 27, 538, 522/ 381, 656, 927
= 7.21%

27
 5. Return on Common Stockholders Equity = Earnings Available for Common
Stockholders/ Common Stock holders Equity * 100
= 27, 538, 522/ 219, 411, 070 *
100
= 12.55%

6. Earnings Per Share = Earnings Available for Common Stockholders/

No. of Common Stock Outstanding
= 27, 538, 522/ 18, 400, 000
= 1.50

 Market Ratio:

1. Price/ Earnings Ratio ( P/E Ratio )= Market Price Per Share Of Common Stock/ EPS

= 10.8/ 1.50

= 7.2

2. Market/ Book Ratio ( M/ B Ratio )= Market Price Per Share of Common Stock/ Book
value Per Share of Common Stock
= 10.8/ 11.92
= 0.91

28
 Where,

Book Value per Share of Common Stock = Common Stock Equity/ No. of Common
Stock Outstanding

= 219, 411, 070/ 18, 400, 000

= 11.92

For 2007

 Liquidity Ratio:

1. Current Ratio = Current Asset/ Current Liability

= 196, 484, 625/ 146,714, 782
= 1.33

2. Quick Ratio = Current Asset – Ending Inventory / Current Liability

= 196, 484, 625 - 60, 445, 455/ 146, 714, 782
= 0.93

29
 Debt Ratio:

1. Debt Ratio = Total Liability/ Total Asset

= 146, 714, 782/ 373, 492, 665
= 39.28%

2. Times Interest Earned Ratio = EBIT/ Interest

= 21, 580, 564/ 12, 337, 746
= 1.75 Times.

 Activity Ratio:

1. Inventory Turnover Ratio = COGS/ Average Inventory

= 282, 070, 942/ 60, 137, 241
= 4.70 Times.

2. Average Age of Inventory = Average Inventory/ COGS *365

= 60, 137, 241/282, 070, 942* 365
= 77.81 days.

3. Average Collection Period = A/C Receivable/ Sales *365

= 41, 630, 756/ 346, 245, 351*365
= 43.89 days.

4. Average Payment Period = Accounts Payable/ Purchase *365

= 14, 282, 730/ 188, 983, 220 *365
= 27.59days.

30
 5. Total Asset Turnover Ratio = Sales/ Total Asset
= 346, 245,351/ 373, 492, 665
= 0.93 Times.

 Profitability Ratio:

1. Net Profit Margin = Earnings Available for Common Stockholders/

Sales *100
= 12, 948, 338/ 346, 245, 351 * 100
= 3.73%

2. Gross Profit Margin = Gross Profit/ Sales * 100

= 64, 174, 409/ 346, 245, 351 * 100
= 18.53%

3. Operating Profit Margin = Operating Profit/ Sales * 100

= 22, 659, 592/ 346, 245, 351 * 100
= 6.54%

4. Return on Asset ( ROE ) = Earnings Available for common

Stockholders/ Total Asset * 100
= 12, 948, 338/ 373, 492, 665
= 3.47%

5. Return on Common Stockholders Equity = Earnings Available for Common

Stockholders/ Common Stock holders Equity * 100
= 12, 948, 338/ 226, 777, 883
= 5.71%

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 6. Earnings Per Share = Earnings Available for Common Stockholders/
No. of Common Stock Outstanding
= 12, 948, 338/ 18, 400, 000
= 0.70

 Market Ratio:

1. Price/ Earnings Ratio ( P/E Ratio )= Market Price Per Share Of Common Stock/ EPS

= 13.20/ 0.70

= 18.86

2. Market/ Book Ratio ( M/ B Ratio )= Market Price Per Share of Common Stock/ Book
value Per Share of Common Stock

= 13.20/ 12.32

= 1.07

Where,

Book Value per Share of Common Stock = Common Stock Equity/ No. of Common
Stock Outstanding

= 226, 777, 883/ 18, 400, 000

32
 = 12.32

For 2008

 Liquidity Ratio:

1. Current Ratio = Current Asset/ Current Liability

= 222, 880, 222/ 180, 000, 955
= 1.24

2. Quick Ratio = Current Asset – Ending Inventory / Current Liability

= 143, 594, 821/ 180, 000, 955
= 0.80

33
 Debt Ratio:

1. Debt Ratio = Total Liability/ Total Asset

= 180, 000, 955/ 414, 194, 443
= 43.46%

2. Times Interest Earned Ratio = EBIT/ Interest

= 23, 522, 391/ 10, 376, 679
= 2.27 Times.

 Activity Ratio:

1. Inventory Turnover Ratio = COGS/ Average Inventory

= 316, 992, 595/ 69, 865, 428
= 4.54 Times.

2. Average Age of Inventory = Average Inventory/ COGS *365

= 69, 865, 428/ 316, 992, 595 * 365
= 80.45 days.

3. Average Collection Period = A/C Receivable/ Sales *365

= 58, 476, 200/ 384, 463, 424*365
= 55.52 days.

4. Average Payment Period = Accounts Payable/ Purchase *365

= 46, 232, 972/ 201, 951, 037 *365

34
 = 83.56 days.

5. Total Asset Turnover Ratio = Sales/ Total Asset

= 384, 463, 424/ 414, 194, 443
= 0.93 Times.

 Profitability Ratio:

1. Net Profit Margin = Earnings Available for Common Stockholders/

Sales *100
= 14, 113, 435/ 384, 463, 424* 100
= 3.67%

2. Gross Profit Margin = Gross Profit/ Sales * 100

= 67, 470, 829/ 384, 463, 424 * 100
= 17.54%

3. Operating Profit Margin = Operating Profit/ Sales * 100

= 24, 698, 511/ 384, 463, 424 * 100
= 6.42%

4. Return on Asset ( ROA ) = Earnings Available for common

Stockholders/ Total Asset * 100
= 14, 113, 435/ 414, 194, 443 * 100
= 3.41%

5. Return on Common Stockholders Equity = Earnings Available for Common

Stockholders/ Common Stock holders Equity * 100

35
 = 14, 113, 435/ 234, 193, 488 *
100
= 6.03%

6. Earnings Per Share = Earnings Available for Common Stockholders/

No. of Common Stock Outstanding
= 14, 113, 435/ 18, 400, 000
= 0.77

 Market Ratio:

1. Price/ Earnings Ratio ( P/E Ratio )= Market Price Per Share Of Common Stock/ EPS

= 23.0/ 0.77

= 29.87

2. Market/ Book Ratio ( M/ B Ratio )= Market Price Per Share of Common Stock/ Book
value Per Share of Common Stock

= 23.0/ 12.73

= 1.81

Where,

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 Book Value per Share of Common Stock = Common Stock Equity/ No. of Common
Stock Outstanding

= 234, 193, 488/ 18, 400, 000

= 12.73

For 2009

 Liquidity Ratio:

1. Current Ratio = Current Asset/ Current Liability

= 222, 835, 498/ 224, 160, 732
= 0.99

2. Quick Ratio = Current Asset – Ending Inventory / Current Liability

= 162, 325, 108/ 224, 160, 732
= 0.72

37
 Debt Ratio:

1. Debt Ratio = Total Liability/ Total Asset

= 224, 160, 732/ 479, 937, 633
= 46.71%

2. Times Interest Earned Ratio = EBIT/ Interest

= 29, 770, 225/ 11, 077, 611
= 2.69 Times.

 Activity Ratio:

1. Inventory Turnover Ratio = COGS/ Average Inventory

= 434, 969, 289/ 69, 897, 895.5
= 6.22 Times.

2. Average Age of Inventory = Average Inventory/ COGS *365

= 69, 897, 895.5/ 434, 969, 289 * 365
= 58.65 days.

3. Average Collection Period = A/C Receivable/ Sales *365

= 57, 794, 689/ 522, 439, 574 * 365
= 40.38 days.

4. Average Payment Period = Accounts Payable/ Purchase *365

= 40, 995, 911/ 286, 066, 433 *365
= 52.31 days.

38
 5. Total Asset Turnover Ratio = Sales/ Total Asset
= 522, 439, 574/ 479, 937, 633
= 1.09 Times.

 Profitability Ratio:

1. Net Profit Margin = Earnings Available for Common Stockholders/

Sales *100
= 21, 583, 413/ 522, 439, 574 * 100
= 4.13%

2. Gross Profit Margin = Gross Profit/ Sales * 100

= 87, 470, 285/ 522, 439, 574 * 100
= 16.74%

3. Operating Profit Margin = Operating Profit/ Sales * 100

= 30, 258, 736/ 522, 439, 574 * 100
= 5.79%

4. Return on Asset ( ROA ) = Earnings Available for common

Stockholders/ Total Asset * 100
= 21, 583, 413/ 479, 937, 633 * 100
= 4.50%

5. Return on Common Stockholders Equity = Earnings Available for Common

Stockholders/ Common Stock holders Equity * 100
= 21, 583, 413/ 255, 776, 901 *
100

39
 = 8.44%

6. Earnings Per Share = Earnings Available for Common Stockholders/

No. of Common Stock Outstanding
= 21, 583, 413/ 18, 400, 000
= 1.17

 Market Ratio:

1. Price/ Earnings Ratio ( P/E Ratio )= Market Price Per Share Of Common Stock/ EPS

= 53.52/ 1.17

= 37.2

2. Market/ Book Ratio ( M/ B Ratio )= Market Price Per Share of Common Stock/ Book
value Per Share of Common Stock

= 43.52/ 13.90

= 3.13

Where,

Book Value per Share of Common Stock = Common Stock Equity/ No. of Common
Stock Outstanding

= 255, 776, 901/18, 400, 000

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 = 13.90

For 2010

 Liquidity Ratio:

1. Current Ratio = Current Asset/ Current Liability

= 258, 593, 052/ 260, 265, 756
= 0.99

2. Quick Ratio = Current Asset – Ending Inventory / Current Liability

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 = 194, 614, 247/ 260, 265, 756
= 0.75

 Debt Ratio:

1. Debt Ratio = Total Liability/ Total Asset

= 260, 265, 756/ 542, 877, 282
= 47.94%

2. Times Interest Earned Ratio = EBIT/ Interest

= 37, 013, 276/ 7, 664, 756
= 4.83 Times.

 Activity Ratio:

1. Inventory Turnover Ratio = COGS/ Average Inventory

= 444, 598, 348/ 62, 244, 597.5
= 7.15 Times.

2. Average Age of Inventory = Average Inventory/ COGS *365

= 52, 244, 597.5/ 444, 958, 348 * 365
= 51.05 days.

3. Average Collection Period = A/C Receivable/ Sales *365

= 59, 343, 138/ 539, 554, 916 * 365
= 40.14days.

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 4. Average Payment Period = Accounts Payable/ Purchase *365
= 103, 757, 840/ 304, 286, 993 *365
= 124.46 days.

5. Total Asset Turnover Ratio = Sales/ Total Asset

= 539, 554, 916/ 542, 877, 282
= 0.99 Times.

 Profitability Ratio:

1. Net Profit Margin = Earnings Available for Common Stockholders/

Sales *100
= 26, 834, 625/ 539, 554, 916 * 100
= 4.97%

2. Gross Profit Margin = Gross Profit/ Sales * 100

= 94, 596, 568/ 539, 554, 916 * 100
= 17.53%

3. Operating Profit Margin = Operating Profit/ Sales * 100

= 37, 663, 940/ 539, 554, 916 * 100
= 6.98%

4. Return on Asset ( ROA ) = Earnings Available for common

Stockholders/ Total Asset * 100
= 26, 834, 625/ 542, 877, 282 * 100
= 4.94%

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 5. Return on Common Stockholders Equity = Earnings Available for Common
Stockholders/ Common Stock holders Equity * 100
= 26, 834, 625/ 282, 611, 526 *
100
= 9.50%

6. Earnings Per Share = Earnings Available for Common Stockholders/

No. of Common Stock Outstanding
= 26, 834, 625/ 20,240, 000
= 1.33

 Market Ratio:

1. Price/ Earnings Ratio ( P/E Ratio )= Market Price Per Share Of Common Stock/ EPS

= 61.30/ 1.33

= 46.09

2. Market/ Book Ratio ( M/ B Ratio )= Market Price Per Share of Common Stock/ Book
value Per Share of Common Stock

= 61.30/ 13.96

= 4.71

Where,

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 Book Value per Share of Common Stock = Common Stock Equity/ No. of Common
Stock Outstanding

= 282, 611, 526/ 20, 240, 000

= 13.96

 DuPont Formula:

For 2006

ROA = Net Profit Margin * Total Asset Turnover

= 7.33% * 0.98

= 7.18%

Modified DuPont Formula:

ROE = ROA * FLM

= 7.18% * 1.73

= 12.42%

Where,

FLM = Total Asset/ Common Stock Equity

= 381, 656, 927/ 219, 411, 070

= 1.73

For 2007

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 ROA = Net Profit Margin * Total Asset Turnover

= 3.73% * 0.93

= 3.47%

Modified DuPont Formula:

ROE = ROA * FLM

= 3.47% * 1.65

= 5.73%

Where,

FLM = Total Asset/ Common Stock Equity

= 373, 492, 665/ 226, 777, 883

= 1.65

For 2008

ROA = Net Profit Margin * Total Asset Turnover

= 3.67% * 0.93

= 3.41%

Modified DuPont Formula:

46
 ROE = ROA * FLM

= 3.41% * 1.76

= 6.00%

Where,

FLM = Total Asset/ Common Stock Equity

= 414, 194, 443/ 234, 193, 488

= 1.76

For 2009

ROA = Net Profit Margin * Total Asset Turnover

= 4.13% * 1.09

= 4.50%

Modified DuPont Formula:

47
 ROE = ROA * FLM

= 4.50% * 1.87

= 08.42%

Where,

FLM = Total Asset/ Common Stock Equity

= 479, 937, 633/ 255, 776, 901

= 1.87

For 2010

ROA = Net Profit Margin * Total Asset Turnover

= 4.97% * 0.99

= 4.92%

Modified DuPont Formula:

ROE = ROA * FLM

= 4.92% * 1.92

= 09.45%

Where,

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FLM = Total Asset/ Common Stock Equity

= 542, 877, 282/ 282, 611, 526

= 1.92

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