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Profitability Ratios: PDS Tech, Inc. Financial Analysis

PDS Tech's financial analysis shows that from 2013 to 2014: - Total revenue decreased by 8.8% and net income decreased from $1.1 million to $0.41 million. - Overall profitability declined as gross profit increased slightly but net profit, return on equity, and return on assets all decreased. - Current ratio improved, but long-term solvency ratios like debt ratio, debt-equity ratio, and interest coverage ratio worsened, indicating increased risk. - The document concludes that PDS Tech's overall financial health and profitability declined from 2013 to 2014 and it needs to increase revenue to improve its position.

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117 views3 pages

Profitability Ratios: PDS Tech, Inc. Financial Analysis

PDS Tech's financial analysis shows that from 2013 to 2014: - Total revenue decreased by 8.8% and net income decreased from $1.1 million to $0.41 million. - Overall profitability declined as gross profit increased slightly but net profit, return on equity, and return on assets all decreased. - Current ratio improved, but long-term solvency ratios like debt ratio, debt-equity ratio, and interest coverage ratio worsened, indicating increased risk. - The document concludes that PDS Tech's overall financial health and profitability declined from 2013 to 2014 and it needs to increase revenue to improve its position.

Uploaded by

Michael Johnson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PDS Tech, Inc.

Financial Analysis
For financial analysis of PDS Tech we have used last two years financial results, to
check company financial health and profitability position. The company generated total
revenue of $373 million in 2013 and $340 in 2014. It means PDS in 2014 company total
revenue decreased by 8.8%. Its net income also decreased from $1.1 million to $0.41
million in 2014. Besides this company total assets decreased from $59.56 million in
2013 to $56.16 in 2014.
To make its financial results more meaningful, we have used ratio analysis to interpret
its profitability position, assets management and liquidity position.
The overall gross profit amount reduced but gross profit ratio increased by 0.4% in
2014. Its net profit ratio decreased from 5.98% in 2013 to 2.11% in 2014. Besides this
its return on equity and return on assets also decreased in 2014. It means company
profitability position in 2014 is worse than 2013.

Profitability Ratios
10.00%
8.56%
8.00%

Axis Title

8.60%

Gross profit

5.98%
6.00%

Net Profit

4.00%

Return on equity

1.89%
2.00%
0.29%
0.00%
2013.0

Return on assets

2.11%
0.70%
0.12%
2014.0

Current ratio of company increased from 4.31 in 2013 to 4.79 in 2014. It means
company has the ability to meet its all short term obligation without any default.

Current ratio
5.00
4.80

4.79
Current ratio

4.60
4.40

4.31

4.20
4.00
2013.0

2014.0

To determine company long term solvency position we have used debt ratio, debt equity
ratio and interest coverage ratio. Debt ratio of company is 0.68 in 2013 which decreased
to 0.65 in 2014. Its debt equity ratio decreased from 2.14 in 2013 to 1.87 in 2014. Its
long term solvency is improved in 2014 but still it is using huge outside debt which is
increasing risk of long term solvency. On the other hand its interest coverage ratio is
decreased from 2.61 to 1.87 in 2014.

Solvency Ratios
3.00
2.61
2.50
2.14
2.00
Axis Title

1.87
1.76

1.50
1.00
0.68
0.50
2013.0

Debt ratio
Debt equity ratio
Interest coverage

0.65
2014.0

Overall company financial health and profitability position in 2014 is decreased as


compared with 2013. PDS Tech profitability is declining besides huge long term
solvency threat. To improve its financial position company should increase its net
revenue.

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