25720 Applied financial management

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TASK-1

RATIO ANALYSIS

Ratio Analysis
Particulars	Formulae	Ratio
2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Profitability Ratios
1	Gross Profit Ratio	Gross Profit/ Sales	26.08%	25.06%	26.30%	24.16%	23.55%	24.67%	29.25%	32.98%	31.92%	17.11%
Gross Profit	$11,972	$16,202	$20,615	$26,396	$46,269	$64,084	$94,542	$121,723	$142,585	$52,015
Sales	$45,907	$64,661	$78,380	$109,256	$196,439	$259,738	$323,190	$369,086	$446,739	$304,030
2	Net Profit Ratio	Net profit/ Sales	18.11%	18.17%	17.05%	14.98%	13.99%	15.60%	16.81%	19.69%	19.15%	1.39%
Net Profit	$8,312	$11,746	$13,367	$16,365	$27,479	$40,508	$54,338	$72,670	$85,551	$4,224
Sales	$45,907	$64,661	$78,380	$109,256	$196,439	$259,738	$323,190	$369,086	$446,739	$304,030
3	Return on Assets	Net profit/ Average total assets	14.16%	14.05%	11.04%	6.60%	6.24%	7.10%	7.34%	9.03%	8.52%	0.55%
Net Profit	$8,312	$11,746	$13,367	$16,365	$27,479	$40,508	$54,338	$72,670	$85,551	$4,224
Average Total Assets	$58,714	$83,614	$121,096	$247,765	$440,408	$570,147	$740,155	$804,841	$1,003,849	$763,517
4	Return on Shareholders' Equity	Net profit/ Average SHE	21.74%	22.16%	18.31%	12.31%	11.65%	14.92%	13.54%	15.41%	14.44%	0.77%
Net Profit	$8,312	$11,746	$13,367	$16,365	$27,479	$40,508	$54,338	$72,670	$85,551	$4,224
Average Stockholders' Equity	$38,231	$53,009	$72,985	$132,884	$235,911	$271,585	$401,404	$471,492	$592,482	$548,087
Liquidity Ratios
1	Current Ratio	Current Assets/ Current Liabilities	1.50	1.38	1.33	1.29	1.20	1.07	1.04	1.17	1.30	1.14
Current Assets	$28,432	$38,298	$42,216	$135,265	$198,704	$254,226	$284,889	$340,737	$478,138	$173,822
Current liabilities	$18,900	$27,712	$31,661	$105,036	$165,389	$237,293	$273,921	$291,394	$367,834	$152,997
2	Quick Ratio	Quick Assets/ Current Liabilities	1.50	1.38	1.33	1.29	1.20	1.07	1.04	1.17	1.30	1.14
Quick Assets	$28,432	$38,298	$42,216	$135,265	$198,704	$254,226	$284,889	$340,737	$478,138	$173,822
Current liabilities	$18,900	$27,712	$31,661	$105,036	$165,389	$237,293	$273,921	$291,394	$367,834	$152,997
3	Cash Ratio	Cash & marketable securities/ Current Liabilities	0.83	0.44	0.43	0.30	0.25	0.34	0.29	0.29	0.38	0.61
Cash and Marketable Securities	$15,681	$12,210	$13,535	$32,000	$40,663	$81,178	$79,217	$84,297	$138,791	$92,843
Current liabilities	$18,900	$27,712	$31,661	$105,036	$165,389	$237,293	$273,921	$291,394	$367,834	$152,997
4	Net working capital	Current Assets - Current Liabilities	9532	10586	10555	30229	33315	16933	10968	49343	110304	20825
Current Assets	$28,432	$38,298	$42,216	$135,265	$198,704	$254,226	$284,889	$340,737	$478,138	$173,822
Current liabilities	$18,900	$27,712	$31,661	$105,036	$165,389	$237,293	$273,921	$291,394	$367,834	$152,997
Efficiency Ratios
1	Receivable Turnover	Net credit sales/ Average Accounts Receivable	3.68	2.52	2.80	1.08	1.28	1.54	1.61	1.46	1.36	4.71
Net Credit Sales	$45,907	$64,661	$78,380	$109,256	$196,439	$259,738	$323,190	$369,086	$446,739	$304,030
Average Accounts Receivable	$12,463	$25,676	$27,975	$101,286	$153,398	$168,130	$201,210	$252,237	$328,771	$64,535
2	Days Sales Outstanding	360 days/Receivable Turnover	97.73	142.95	128.49	333.74	281.12	233.03	224.13	246.03	264.94	76.42
3	Inventory Turnover	Cost of Sales/Average Inventory	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil
Cost of Sales	$33,935	$48,459	$57,765	$82,860	$150,170	$195,654	$228,648	$247,363	$304,154	$252,015
Average Inventory	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
4	Days Inventory outstanding	360 days/Inventory Turnover	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.
5	Accounts Payable Turnover	Net Credit Purchases/ Average Accounts Payable	2.16	2.11	2.22	0.88	1.01	0.97	0.98	0.98	0.96	2.51
Net Credit Purchases	$33,935	$48,459	$57,765	$82,860	$150,170	$195,654	$228,648	$247,363	$304,154	$252,015
Average Accounts Payable	$15,717	$22,927	$26,048	$94,126	$148,385	$202,720	$233,049	$253,621	$316,753	$100,499
6	Days Payable Outstanding	360 days/Payable Turnover	166.73	170.32	162.33	408.95	355.72	373.00	366.93	369.11	374.91	143.56
7	Operating Cycle	Days Inventory Outstanding Days Sales Outstanding	97.73	142.95	128.49	333.74	281.12	233.03	224.13	246.03	264.94	76.42
8	Cash Conversion Cycle	Operating Cycle-Days payable outstanding	-69.00	-27.37	-33.85	-75.21	-74.60	-139.97	-142.80	-123.08	-109.98	-67.15
9	Total Asset turnover	Net Sales/ Average total assets	0.78	0.77	0.65	0.44	0.45	0.46	0.44	0.46	0.45	0.40
Net Sales	$45,907	$64,661	$78,380	$109,256	$196,439	$259,738	$323,190	$369,086	$446,739	$304,030
Average total assets	$58,714	$83,614	$121,096	$247,765	$440,408	$570,147	$740,155	$804,841	$1,003,849	$763,517
Leverage Ratios
1	Debt Ratio	Total liabilities/Total assets	0.35	0.37	0.40	0.46	0.46	0.52	0.46	0.41	0.41	0.28
Total Liabilities	$20,483	$30,605	$48,111	$114,881	$204,497	$298,562	$338,751	$333,349	$411,367	$215,430
Total assets	$58,714	$83,614	$121,096	$247,765	$440,408	$570,147	$740,155	$804,841	$1,003,849	$763,517
2	Equity Ratio	Total equity/ Total assets	0.65	0.63	0.60	0.54	0.54	0.48	0.54	0.59	0.59	0.72
Total equity	$38,231	$53,009	$72,985	$132,884	$235,911	$271,585	$401,404	$471,492	$592,482	$548,087
Total assets	$58,714	$83,614	$121,096	$247,765	$440,408	$570,147	$740,155	$804,841	$1,003,849	$763,517
3	Debt to Equity ratio	Total liabilities/ Total equity	0.54	0.58	0.66	0.86	0.87	1.10	0.84	0.71	0.69	0.39
Total Liabilities	$20,483	$30,605	$48,111	$114,881	$204,497	$298,562	$338,751	$333,349	$411,367	$215,430
Total equity	$38,231	$53,009	$72,985	$132,884	$235,911	$271,585	$401,404	$471,492	$592,482	$548,087
4	Times Interest Earned	EBIT/ Interest Expense	58.07	77.41	-37.51	-61.72	-46.86	-35.99	-24.91	-34.54	-45.20	-1.80
EBIT	$11,673	$16,566	$19,619	$23,763	$40,112	$59,523	$80,872	$106,909	$124,981	$13,605
Interest Expense	$201	$214	-$523	-$385	-$856	-$1,654	-$3,246	-$3,095	-$2,765	-$7,571
Valuation and Growth Ratios
1	Earnings per Share	Income available to ESH/ Average common shares outstanding	0.28	0.39	0.45	0.55	0.92	1.35	1.81	2.42	2.85	0.14
Income available to ESH	$8,312	$11,746	$13,367	$16,365	$27,479	$40,508	$54,338	$72,670	$85,551	$4,224
Average common shares outstanding	30000	30000	30000	30000	30000	30000	30000	30000	30000	30000
2	Price-earnings ratio	MPS/ EPS	16.51	12.34	23.95	35.27	36.39	33.90	44.42	39.86	28.53	250.06
MPS	Market capitalisation/common shares outstanding	4.57	4.83	10.67	19.24	33.33	45.77	80.46	96.56	81.37	35.21
EPS	0.28	0.39	0.45	0.55	0.92	1.35	1.81	2.42	2.85	0.14
3	Dividend Payout Ratio	DPS/ EPS	0.09	0.49	0.56	0.56	0.49	0.52	0.56	0.52	0.53	6.26
DPS	0.03	0.19	0.25	0.30	0.45	0.70	1.02	1.25	1.51	0.88
EPS	0.28	0.39	0.45	0.55	0.92	1.35	1.81	2.42	2.85	0.14
4	Dividend Yield Ratio	DPS/ MPS	0.01	0.04	0.02	0.02	0.01	0.02	0.01	0.01	0.02	0.03
DPS	0.03	0.19	0.25	0.30	0.45	0.70	1.02	1.25	1.51	0.88
MPS	4.57	4.83	10.67	19.24	33.33	45.77	80.46	96.56	81.37	35.21
5	Book Value Per Share	Common stockholders' equity/ Average common shares	1.27	1.77	2.43	4.43	7.86	9.05	13.38	15.72	19.75	18.27
Common stockholders' equity	$38,231	$53,009	$72,985	$132,884	$235,911	$271,585	$401,404	$471,492	$592,482	$548,087
Average common shares	30000	30000	30000	30000	30000	30000	30000	30000	30000	30000

Summary

This writeup summarises the analysis outcomes of ratios calculated for Footloose Travel Ltd related to the period 2011-2020. For the profitability ratios, all the metrics namely, gross profit, net profit, return on assets, and return on shareholders’ equity, are the lowest of all ten years. This implies that the profit earning capacity has been severely impacted. The liquidity position slightly reduced denoted by the working capital, and current ratio. However, the cash ratio has increased. This implies that the company’s ability to pay its current liabilities has been deteriorated despite increasing the cash hoarding levels. The condition however is manageable as the ratios are still within the permissible ranges. Next, the efficiency ratios are analyzed. The receivable turnover ratio has drastically increased to a level which is the highest of ten years and simultaneously the days receivables has reduced to the minimum level. A Higher turnover ratio is better but this is also to be noted that the company is not giving enough credit to its receivables which can hamper the quality of its services and customer satisfaction. The accounts payable ratio has also increased to the highest level of ten years that corresponds to the days payable outstanding being the lowest. Higher ratio is great but this also implies that the company is not getting enough credit from the payables. Net efficiency has been impacted, however the same is justified by the pandemic exposures. The credit options are impacted both for the receivables as well as payables. For the leverage position of the company, debt to equity ratio is 0.39 which is the minimum of all the ten years. This signifies a low level of debt as compared to equity. The interest cost that is a committed cost, is lower in this case. The times interest earned ratio is 1.8 which is also downgraded badly from the past years. The overall leverage position implies that despite reducing the debt portion as against the equity, the company can pay its committed cost out of the available earnings only for approx two years. This puts a question on the solvency position of the company and increased risk for the debt holders. The company’s EPS has been greatly reduced which has further impacted the Price earning ratio as well. Both the metrics suggest that the equity shareholders are not getting sufficient returns and also doesn’t justify the market price. The valuation and growth potential both have been impacted by the pandemic.

Task-2 External funding required: $136,466

All figures are in $thousands
2021 Forecast
PROFIT AND LOSS STATEMENT
Operating revenue	$319,232
Other revenue	$4,307
Total revenue	$323,539
Operating expenses	-$239,616
Depreciation and amortisation	-$44,638
Total expenses	-$284,253
Profit before interest and taxes	$39,285
Interest expense	-$7,571
Profit before tax	$31,714
Tax Expense	-$9,514
Net profit (or loss)	$22,200
Dividends paid	-$26,456
2021 Forecast
BALANCE SHEET
Cash	$0
Accounts receivables	$67,762
Inventories	$0
Other current assets	$17,266
Total current assets	$85,028
Fixed assets	$61,865
Goodwill	$478,211
Other non-current assets	$55,193
Total non-current assets	$595,269
Total assets	$680,297
Account payable	$105,524
Short-term debt	$18,672
Other current liabilities	$35,517
Total current liabilities	$159,713
Long-term debt	$44,423
Other non-current liabilities	$18,911
Total non-current liabilities	$63,334
Total liabilities	$223,047
Owners' equity	$543,831

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