Financial Ratios
FIN/571
July 22, 2013
Interpreting Financial Results
Liquidity: Current Ratio Parrino, Kidwell, & Bates (2012) detail the current ratio as current assets divided by liabilities. The current ratio identifies a firm’s potential to pay shortterm liabilities; higher liquidity is a good sign for potential creditors (Parrino et al., 2012). At the same time, however, the current ratio should not greatly exceed benchmarks of other competitors (Parrino et al., 2012). This could be indicative of mismanagement of current assets and less cash flow for investors (Parrino et al., 2012). Current assets ($29,307,990) divided by current liabilities ($20,530,890) gives a current ratio for ABC SDN. BHD. of 1.43. …show more content…
$22,170 – $308
$22,170
to give a gross profit margin of .086. The GPM of ABC SDN. BHD. is higher than that of its competitor, which indicate the company is doing well. The operating profit margin helps investors understand quality of the company in terms of how much a company makes on each dollar of sale. The formula to calculate the operating profit margin is
EBIT
Net Sales
$4,529,000
$121,592,000
which gives an operating profit margin of .037. The previous accounting period the company had OPM of .035. During this same accounting period AMR had a net loss.
The net profit margin helps investors understand how profitable a company is. This explains how much profit a company has per dollar of sales. ABC SDN. BHD. has a net profit margin of
Net Income
Net Sales
$2,707,000
$121,592,000
which gives a net profit margin of 2.22%. The net profit margin for the previous accounting period was 1.92%. This indicates that the company has produced an increase in profit per dollar from one accounting period to the next. The competitors had a net loss for the accounting period ending 2010.
Conclusion
References
Air Canada. (2010). Air

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