Ratio Analysis and Risk and Return of Fmcg Industry

Based on the income statement and balance sheet, we can get the cash flow statement for year 2002, 2003 and the first quarter of 2004. From the cash flow, it is obviously see that the main use of fund is for operations, materials purchasing, wages payment, interest payment etc. While the source of fund is from financing, bank loan and trade notes payables.

FMCGs are products that have a quick turnover, and relatively low cost. FMCG products are those that get replaced within a year and they constitute a major part of consumers‟ budget in many countries. The FMCG sector primarily operates on low margin and therefore success very much depends on the volume of sales (Sarangapani & Mamatha 2008).

In order a company to have a solid financial health, the quick ratio must be 1 time, which is a sign that the liquidity level of a company is high. In J.B Hunt, the quick ratio increased from the last year, which shows that liquidity level of the company is high. It has the ability to pay off short-term obligations without the base on the sale of its

ratios are low. Wal-Mart’s and Sears’ current ratios are 0.88 and 1.09. It appears that both

In general, the company had a good fiscal year. It improved its ability to generate profit. All of the main

In conclusion, financial statements of Dollar General present the increase in company’s profitability and sales over the last two years, they reduced their expenses as well. The only information that the statements do not disclose is which brands of merchandise increased their sales, and what was the cost of goods sold compared to the profit they made. Since the company was concerned about promotion of their private brand it would be helpful to know what percent of sales does their private brand make comparison to other brands. Nevertheless, the long-term liquidity risk does not look as safe. The company will have to show the stability in its ratios overtime to insure investors that it has low risk and is able to repay its debt in a long run as well as maintain stable

Both companies have had steady cash flow in recent years. While Cone maintains a small amount of cash, it is consistent. Sunrun has shown a steady, large amount of cash on hand which there increase in net income can allow them to keep a steady amount of cash.

2-Introduction 2.1-About FMCG Industry Fast Moving Consumer Goods (FMCG) industry is one of the fastest growing industries in the world, which consists of food as well as non-food consumable products. The volume purchased by end users is usually on a small scales and everyday use basis. This industry had suffered immensely during the global financial crises however, most of the companies conquered profitability and sales growth by 2010. These products are mostly available at supermarkets, chain stores, hypermarkets, grocery stores, etc. The

Moreover, return on equity, gross profit margin and fixed asset turnover are also improving over the period demonstrating the overall good health of the business. Finally, percentage of sales growth is improving over the four years period and as Mr. Maris said “the company will continue to grow in the foreseeable future”

GM has just over one year’s worth. DC currently has negative free cash flows because of high capital expenditures, so it has negative Cash to Free Cash Flow ratio. Based on all this Ford has a good amount of cash.

The quick ratio is a more rigorous test for the company’s ability to meet its short-term debts than current ratio because inventory was eliminated from current assets. The quick ratio for PPL indicates serious issues as it has decreased from 0.31 in 2012 to 0.07 in 2016. The low quick ratio implies that a considerable portion of the current assets of the company is tied up as part of its inventory (Bragg, 2007), which means that the lower level of quick liquidity ratio indicates a high level of financial risk. The balance sheet for PPL (PPL, 2016) revealed that, particularly in 2016, the inventory accounted for 90% of the current assets. Therefore, the company must improve its working capital to meet its near term current liabilities.

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Liquidity In analyzing liquidity of the company, the current ratio is not very telling of a falling company. The company increased its ratio throughout the period of the income statement thus building upon its company assets and allowing for a 6-1 ratio of assets over its liabilities. This implies the company is still able to operate sufficiently even though it did not make its optimum current ratio of about 8-1. However, when one takes the inventory out of the equation with the quick ratio, the numbers show the true strength of short term liquidity. The numbers are still good, and do not indicate failure – but are

These ratios help company in determining its capability to pay short-term debts. Liquidity ratios inform about, how quickly a firm can obtain cash by liquidating its current assets in order to pay its liabilities. General liquidity ratios are: current ratio and quick ratio. Current ration can be obtain by dividing company’s current assets by its’ current liabilities. Generally a current ratio of two is considered as good (Cleverley et al., 2011). Quick ratio also known as acid test determines company’s liabilities that need to be fulfilled on urgent basis. Quick ratio can be obtained by dividing quick assets by current liabilities. Quick ratio is considered as stricter because it excludes inventories from current assets. Generally a quick ratio of 1:1 is considered as good for the company. Higher quick

The quick ratio reflects on a company’s ability to meet its current liabilities without liquidating inventories that could require markdowns. It is a more stringent test of liquidity than the current ratio and may provide more insight into company liquidity in some cases. For Colgate-Palmolive, the quick ratio has declined from 0.73 in 2008 to 0.58 in 2010. While this does not necessarily mean a problem, a higher current ratio and quick ratio analysis will mean that the company will not have difficulty in meeting its short-term obligations from its operations and not by liquidating its assets.