Summary: Capsim Initial Financial Analysis

above the 75th quartile for the industry. I believe this result to be a strength, however, I do

K. Return on total assets ratio is 10.5% means the company is not good at converting its investment into profit.

The firm shows positive health for the Shareholders Equity with an equity ratio of 44.2% in 2011 and increasing to 45.2% in 2012. Calculating the percent of total assets that shareholders would receive in the event of company liquidation looks positive and very healthy for any investors or shareholders of this firm. The interest coverage ratio is also at a value that is significantly positive 14.0% in 2011 and 12.8% in 2012. Although 2021 shows a decrease, the company is still very capable of generating sufficient revenues to cover their interest payments on any debt they have incurred.

The first ratio that will be used is the profit margin ratio. This ratio is computed by dividing net income by sales. The second ratio to be used is known as the return on assets ratio (ROA). Return on Assets is computed by dividing net income by total assets. The final ratio that will used within this report is called the return on equity ratio (ROE). This ratio can be calculated by dividing a company’s net income by its total equity.

The main question of the study is how financially well the company is at the moment and what investment expectation it generates on the market nowdays.

When combining the figures for ROE, ROA and the DuPont analysis it appears that the company is using leverage favourably. ROE is greater than ROA and assets are greater than equity. This is a positive sign for shareholders as it suggests a good investment return in a company that is managing its shareholder equity well (Evans & McDowell, 2009).

Next is Asset turnover with .55 times which is a measure of the efficiency of asset utilization. Finally the equity multiplier with 2.26 which is a measure of financial leverage of the firm. When compared to the traditional ratios we get similar results; Profit margin 25.44% (27% DuPont) versus 18.75% industry average. Asset turnover is .54 (.55 DuPont) versus .50 industry average. Equity multiplier 2.28 times (2.26 times DuPont) versus 2 times industry average. The results show that the DuPont analysis using ROE as the main determinant are very similar to the regular ratios. Furthermore the ROE of the traditional ratio is 31.32% with DuPont being 33.10% versus the industry average of 18.75% shows that the firms ROE is very robust. While the firm has some challenges with respect to liquidity and inventory management, as well as debt management it still is doing a good job with respect to its shareholders. However it could be doing a little better for the stockholders, and needs to address some of the above issues mentioned.

Return on Assets (ROA) of 8.74% and Return on Equity (ROE) of 12.4% are both positive.

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. Star River has always depended much on debt for its financing and the trend shows this ratio may get higher in future. Star River, with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and

This is said because the return on assets ratio is low. When it is low the company uses less money on more investment. The profit margin is low as well calculated at only .6% showing that Kudler Foods had a low profit at that reporting time.  The debt to total assets ratio was .28%, which showed the company is healthy. The times interest earned ratio was 9.8%, which backs up claims of financial health. The solvency ratio shows Kudler Foods can pay back long-term obligations. Each ratio has different users interest in mind. Return on common stockholder’s equity is defined as Net Income / Total Capital, and Return on Common Stockholders’ Equity: 676,795 / 1,928,960 = 35.09% Return. Here is a comparison of this (2003) information to the same information from last years’ (2002) records to begin to determine a trend.

The return on equity, ROE, is as high as 20.69% (above 15%). It illustrate that the RL Corporation uses the investors’ money pretty effectively. As of return of assets, equals to 13.10%, which reveals how much profit a company earns for every dollar of its assets. Both ROE and ROA for RL Corporation seems really good and they provide a picture that managers are doing a good job of generating return from shareholders’ investments.

Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.

Financial performance Revenue, DKK million Profit before special items, DKK million Tax on profit for the year, DKK million Net profit for the year, DKK million Operating margin (ROS) Return on equity (ROE) Return on invested capital (ROIC) 11,661 3,002 -683 2,204 24.9% 82.3% 139.5% 9,526 2,004 -500 1,352 22.0% 72.2% 101.8% 8,027 1,471 -386 1,028 18.1% 71.6% 69.7% 7,798 1,405 9 1,290 17.0% 147.1% 63.6%

This ratio is expressed in percentage. If the ratio is high it shows that the company is utilizing its assets in better way to generate its income. If the ratio is less it shows that the company is in difficult position to meet its debt. Formula to find the return on assets ratio is: - return on assets = net profit / total assets. Whereas net profit means the amount arriving after deducting all the expenses which includes taxes also. In addition to this he also explains about the profit margin ratio (PMR). PMR is the ratio which expresses the relationship between profit and sales. Formula used to find the PMR is: - Profit margin ratio = net profit/net