IV. Conclusion: Based on your findings on ratio analysis and interpretation, what conclusion can you make? C. Profitability: Based on Sales, based on Investmentbased on Market RatiosProfitability RatioThe purpose of measuring the profitability ratio to knowthe profitability index which was basedinvestment and market ratio as well. Profitability ratio arelisted out belowsales.Net profitability.Gross Profitability·Return on Equity.Debt to Equity Ratio.Profitability Ratio·Based on Sales·For Parent Company= Net income / Total sales * 100-2015Net income = 60289.Total Sales = 503659.= 60289 / 503659 * 100=11.97%- 2014-Net income = 119058· Total Sales = 469190.= 119058 / 469190 * 100= 25.38%Consolidated- 2015- Net income = 13320- Total Sales 514274= 13320 / 514274 * 100-=2.59%-2014Net income 115551.Total Sales = 481225.= 115551 / 481225 * 100-= 24.01%While analyzing the details of the profitability based onthe fact of sales both year parent company and 2014consolidated statement profitability percentage are goodin accordance with the industrial standard as well. Whereas in 2015 consolidation statement it incurred hugedifferent types of cost and non controlling interest part thenet profitability far below the industrial standard as well.Profitability RatioBased on InvestmentReturn on EquityFormula= Net income / Average Shareholders Equity2015Net income = 60286Average Shareholders Equity = 540185 + 577362/2= 60289 / 558773= 0.112014Net income = 119058Average Sharcholders Equity = 577362= 119058 / 577362= 0.21%Consolidated2015Net income = 13320Average Shareholders Equity = 505367 +570072 / 2= 13320 / 537719= 0.0252014Net income = 115551Total Shareholders Equity = 570072115551 / 570072= 0,20=While analyzing the details of the profitability based onthe fact of investment (ROE) both year parent companyand 2014 consolidated statement Return on Equity (ROE)percentage are good in accordance with the industrial2010 Based on financial reports prepare ratio analysis andinterpret the result of the Following ratios: A. Liquidity :Current Ratio, Quick RatioLiquidity ratios are key financial metrics whichdetermines the ability of a company to meet its short-termdebt obligation. It is of three types - current ratio, quickratio and cashflow ratio.Current ratio is calculated as current assets divided bycurrent liabilities. It tells whether the company will beable to meet its obligation which are due within one year.If the current ratio is greater than 1, this means companywill easily meet its debt obligation or vice-versa.Quick ratio tells us whether the company will be able ableto meets its short term debt obligation with its most liquidassets. It is calculated asQuick ratio =If the quick ratio is greater than 1, it is a good indicator ofthe company's financial health and it tells that thecompany will be very easily able to meet its short termdebt obligation.Parent Company Conated20s 24 2s 2144RO ROe so oCument Ase22I 4 aCument ebeCument tesara La 10s 42Cah equivalentsMatetable secuntiesAccounts receivlesRecelvale om ubdariesL2M eQuic atioB) Leverage : Debt to Total Assets Ratio, Debt to EquityRatioRatio Analysis is the financial analysis technique whichevaluate the profitability, liquidity, efficiency andsolvency of the company. It is the technique to evaluatethe financial position of the company overall. With thehelp of ratio analysis, the company can compareperformance with itself by comparing the results ofprevious years or can compare its performance with itscompetitors.Leverage Ratio are the ratios which tells the company'sability to meet its financial obligations. It shows howeffectively the company is utilizing its borrowed amount.Calculation of Leverage Ratio:Calculation of Leverage Ratio: Debt to Total assets andDebt to Total Equity is as follows:Workings:Pareat CompanyCossolidated2015 2014 20152014774133I54018526841207107|RO'00 RO'001 RO'002 ROV0379319450536722657765447577623966184119 265170 2318941-C6+C7 -D6-D? -E6-E783417457007232208Total AssetsTotal EouiyTotal Non-Curet Liabities7Total Carent LiabliiesTotal Debe10 -BS B4Debt to Total Asset Ratio-CSC4 -DS D4 4-ESE4Debt to Total Equity Ratio -BS B5-CSCS -DS DS-ESESParet CompaayCesolidated2015 2014 2015 2014RO00 RO01 RO002 RO'0S774133.00 193,194.00Tetl Aset765,447 00S40.185 00 S77,362 00 s05,367 00Total FquityTotal Non-Cemt LisbilitienTol Curet Labes134174.00170.072 003220 00231894 00264 102 0026,841.003,966 00 22,657.00207.107 00 184119 00 265,170 00188,085 00Total Deb233 948 00287 827.00no Debt to Total Asset Ratie 30.22 2457% 36 19% 31.66%Delt te Tatal Equity Ratie36.19%4% 32.8% 4.95% 4.UInterpretation:Debt to Total Asset Ratio is the ratio which determinesthat how much debt is taken against the company's asset.Higher the ratio, higher will be the use of debts infinancing funds in the company which increases the riskof default of the company.Here, in this case, for both parent and consolidated firm,the debt to total asset ratio is increasing which shows thatmore debt is taken by the company against the asset. It isstill manageable for the company as debt to total assetratio is less than the standard ratio of 40% but thecompany should take care in the upcoming years tomaintain the level of this ratio or should try to decline thisratio.Debt to Total Equity Ratio is the ratio which determinesthat how much debt is taken against the company's Equity.Higher the ratio, higher will be the use of debts infinancing funds in the company which increases the riskof default of the company. This will decrease the incomefor the shareholders.

Question

IV. Conclusion:     Based on your findings on ratio analysis and interpretation, what conclusion can you make? C. Profitability: Based on Sales, based on Investmentbased on Market RatiosProfitability RatioThe purpose of measuring the profitability ratio to knowthe profitability index which was basedinvestment and market ratio as well. Profitability ratio arelisted out belowsales.Net profitability.Gross Profitability·Return on Equity.Debt to Equity Ratio.Profitability Ratio·Based on Sales·For Parent Company= Net income / Total sales * 100-2015Net income = 60289.Total Sales = 503659.= 60289 / 503659 * 100=11.97%- 2014-Net income = 119058· Total Sales = 469190.= 119058 / 469190 * 100= 25.38%Consolidated- 2015- Net income = 13320- Total Sales 514274= 13320 / 514274 * 100-=2.59%-2014Net income 115551.Total Sales = 481225.= 115551 / 481225 * 100-= 24.01%While analyzing the details of the profitability based onthe fact of sales both year parent company and 2014consolidated statement profitability percentage are goodin accordance with the industrial standard as well. Whereas in 2015 consolidation statement it incurred hugedifferent types of cost and non controlling interest part thenet profitability far below the industrial standard as well.Profitability RatioBased on InvestmentReturn on EquityFormula= Net income / Average Shareholders Equity2015Net income = 60286Average Shareholders Equity = 540185 + 577362/2= 60289 / 558773= 0.112014Net income = 119058Average Sharcholders Equity = 577362= 119058 / 577362= 0.21%Consolidated2015Net income = 13320Average Shareholders Equity = 505367 +570072 / 2= 13320 / 537719= 0.0252014Net income = 115551Total Shareholders Equity = 570072115551 / 570072= 0,20=While analyzing the details of the profitability based onthe fact of investment (ROE) both year parent companyand 2014 consolidated statement Return on Equity (ROE)percentage are good in accordance with the industrial2010 Based on financial reports prepare ratio analysis andinterpret the result of the Following ratios: A. Liquidity :Current Ratio, Quick RatioLiquidity ratios are key financial metrics whichdetermines the ability of a company to meet its short-termdebt obligation. It is of three types - current ratio, quickratio and cashflow ratio.Current ratio is calculated as current assets divided bycurrent liabilities. It tells whether the company will beable to meet its obligation which are due within one year.If the current ratio is greater than 1, this means companywill easily meet its debt obligation or vice-versa.Quick ratio tells us whether the company will be able ableto meets its short term debt obligation with its most liquidassets. It is calculated asQuick ratio =If the quick ratio is greater than 1, it is a good indicator ofthe company's financial health and it tells that thecompany will be very easily able to meet its short termdebt obligation.Parent Company Conated20s 24 2s 2144RO ROe so oCument Ase22I 4 aCument ebeCument tesara La 10s 42Cah equivalentsMatetable secuntiesAccounts receivlesRecelvale om ubdariesL2M eQuic atioB) Leverage : Debt to Total Assets Ratio, Debt to EquityRatioRatio Analysis is the financial analysis technique whichevaluate the profitability, liquidity, efficiency andsolvency of the company. It is the technique to evaluatethe financial position of the company overall. With thehelp of ratio analysis, the company can compareperformance with itself by comparing the results ofprevious years or can compare its performance with itscompetitors.Leverage Ratio are the ratios which tells the company'sability to meet its financial obligations. It shows howeffectively the company is utilizing its borrowed amount.Calculation of Leverage Ratio:Calculation of Leverage Ratio: Debt to Total assets andDebt to Total Equity is as follows:Workings:Pareat CompanyCossolidated2015 2014 20152014774133I54018526841207107|RO'00 RO'001 RO'002 ROV0379319450536722657765447577623966184119 265170 2318941-C6+C7 -D6-D? -E6-E783417457007232208Total AssetsTotal EouiyTotal Non-Curet Liabities7Total Carent LiabliiesTotal Debe10 -BS B4Debt to Total Asset Ratio-CSC4 -DS D4 4-ESE4Debt to Total Equity Ratio -BS B5-CSCS -DS DS-ESESParet CompaayCesolidated2015 2014 2015 2014RO00 RO01 RO002 RO'0S774133.00 193,194.00Tetl Aset765,447 00S40.185 00 S77,362 00 s05,367 00Total FquityTotal Non-Cemt LisbilitienTol Curet Labes134174.00170.072 003220 00231894 00264 102 0026,841.003,966 00 22,657.00207.107 00 184119 00 265,170 00188,085 00Total Deb233 948 00287 827.00no Debt to Total Asset Ratie 30.22 2457% 36 19% 31.66%Delt te Tatal Equity Ratie36.19%4% 32.8% 4.95% 4.UInterpretation:Debt to Total Asset Ratio is the ratio which determinesthat how much debt is taken against the company's asset.Higher the ratio, higher will be the use of debts infinancing funds in the company which increases the riskof default of the company.Here, in this case, for both parent and consolidated firm,the debt to total asset ratio is increasing which shows thatmore debt is taken by the company against the asset. It isstill manageable for the company as debt to total assetratio is less than the standard ratio of 40% but thecompany should take care in the upcoming years tomaintain the level of this ratio or should try to decline thisratio.Debt to Total Equity Ratio is the ratio which determinesthat how much debt is taken against the company's Equity.Higher the ratio, higher will be the use of debts infinancing funds in the company which increases the riskof default of the company. This will decrease the incomefor the shareholders.

Accepted Answer

Accounting ratios are the mathematical expressions between two figures taken for comparison. When…