Scribd
Upload
275 views

Financial Analysis

The document compares various profitability, operational efficiency, and financial health ratios between Elen Company and Melanie Company. It shows that Elen Company has higher profitability ratios, is more operationally efficient, and is in better financial health position than Melanie Company based on the calculated ratios.

Uploaded by

Jasmine Acta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
275 views

Financial Analysis

The document compares various profitability, operational efficiency, and financial health ratios between Elen Company and Melanie Company. It shows that Elen Company has higher profitability ratios, is more operationally efficient, and is in better financial health position than Melanie Company based on the calculated ratios.

Uploaded by

Jasmine Acta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

(1) Profitability Ratios

A. Gross Profit Margin/ Gross Profit Rate

Elen Company Melanie Company


Formula Gross Profit/ Net Sales Gross Profit/ Net Sales
Solution 1,030,843 / 3,407,921 215,683.6 / 745,883.60
Answer 30.25% 28.92%

B. Operating Income Margin

Elen Company Melanie Company


Formula Operating Income / Net Operating Income / Net
Sales Sales
Solution 245,938 / 3,407,921 27,253.60 / 745,883.60
Answer 7.22% 3.65%

C. Net Profit Margin

Elen Company Melanie Company


Formula Net Income / Net Sales Net Income / Net Sales
Solution 226,182 / 3,407,921 22,299.20 / 745,883.60
Answer 6.64% 2.99%

D. Return on Assets

Elen Company Melanie Company


Formula Net Income / Average Net Income / Average
Assets Assets
Solution 226,182 / 1,825,664.50 22,299.20 / 471,177.30
Answer 12.39% 4.73%

E. Return on Equity

Elen Company Melanie Company


Formula Net Income / Average Net Income / Average
Equity Equity
Solution 226,182 / 1,452,060.50 22,299.20 / 338,903.40
Answer 15.58% 6.58%

Answer: Elen Company is more profitable than Melanie company.

(2) Operational Efficiency Ratios


A. Asset turnover

Elen Company Melanie Company


Formula Net Sales / Average Asset Net Sales / Average Asset
Solution 3,407,921 / 1,825,664.50 745,883.60 / 471,177.30
Answer 1.87 1.58

B. Fixed asset turnover

Elen Company Melanie Company


Formula Net Sales / Average Fixed Net Sales / Average Fixed
Asset Asset
Solution 3,407,921 / 1,123,441 745,883.60 / 292,094
Answer 3.03 2.55

C. Inventory Turnover

Elen Company Melanie Company


Formula Cost of Goods Sold / Cost of Goods Sold /
Average Inventory Average Inventory
Solution 2,377,078 / 250,515 530,200 / 42,117.7
Answer 9.49 12.59

D. Days in Inventory

Elen Company Melanie Company


Formula 365/Inventory Turnover 365/Inventory Turnover
Solution 365/9.49 365/12.59
Answer 38.46 28.99

E. Accounts Receivable Turnover

Elen Company Melanie Company


Formula Net Sales / Average Net Sales / Average
Accounts Receivable Accounts Receivable
Solution 3,407,921 / 347,800 745,883.60 / 72,109
Answer 9.80 10.34

F. Days in accounts Receivable or Average Collection Period

Elen Company Melanie Company


Formula 365/Accounts Receivable 365/Accounts Receivable
Turnover Turnover
Solution 365/9.80 365/10.34
Answer 37.24 35.30

Answer: Elen Company is more efficient than Melanie Company


(3) Financial Health Ratios
A. Debt to equity ratio

Elen Company Melanie Company


Formula Total Debt / Total Equity Total Debt / Total Equity
Solution 382,415 / 1,481,612 142,929.6 / 347,811.2
Answer 25.81% 41.09%

B. Debt Ratio

Elen Company Melanie Company


Formula Total Debt / Total Assets Total Debt / Total Assets
Solution 382,415 / 1,864.027 142,929.6 / 490,740.80
Answer 20.52% 29.13%

C. Interest Coverage Ratio

Elen Company Melanie Company


Formula Operating Income / Interest Operating Income / Interest
Expense Expense
Solution 245,938 /19,756 27,253.60 / 4,954.40
Answer 12.45 5.50

D. Current Ratio

Elen Company Melanie Company


Formula Current Assets / Current Current Assets / Current
Liabilities Liabilities
Solution 717,145 / 143,715 183,339.2 / 77,765.6
Answer 4.99 2.36

E. Quick Ratio

Elen Company Melanie Company


Formula Quick Assets/Current Quick Assets/Current
Liabilities Liabilities
Solution 421,715 / 143,715 124,449 / 77,765.6
Answer 2.93 1.60

Answer: Elen Company is more financially healthy than Melanie Company

You might also like