Professional Documents
Culture Documents
STATEMENT
FINANCIAL STATEMENT ANALYSIS
Economic ETC.
competition
Climate
Business
Market Supply and
Rates demand
Government
Regulation
BUSINESS
Solvency
Solvency Liquidity
(long-term) (short-term)
CAPITAL STRUCTURE
Capital
Solvency
Structure
Stability of
business
OPERATIONAL EFFICIENCY
The solvency of the business has also improved in 2017. this is reflected
by the decrease in non current liabilities (-50%). The business was able to
settle in 2017 the current maturing loan of P180 000 from 2016.
Liabilities 2017 2016 (decrease) Percent
Current portion
180 000 180 000 - 0%
Noncurrent
portion 180 000 360 000 (180 000) -50%
Total notes payable
360 000 540 000 (180 000) -33.33%
CAPITAL STRUCTURE
The profitability of the business has greatly improved in 2017. (516.49% owners capital .as
profit of the year)
a. Sales have increased at a higher rate than cost of goods sold (66.67% vs 55.56%). This
means that unit cost have either decreased or sales prices have increased.
b. Depreciation expense increased. which could have been brought about by the acquisition
of additional depreciable assets during 2017 .
c. Bad debts expense increased with the increase in accounts receivable . This reflects the
higher risk that the business assumes as a consequence of extending more credit to
customers.
d. Interest expense decreased mainly because of the decrease in notes payable.
TREND ANALYSIS
𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑑𝑒𝑏𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
EQUITY RATIO – PROPORTION OF ASSETS FINANCED THROUGH
EQUITY
𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦
𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
DEBT TO EQUITY RATIO- HOW MUCH DEBT IS USED TO FINANCE THE
ASSETS RELATIVE TO THE AMOUNT PERTAINING TO THE OWNERS
𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑑𝑒𝑏𝑡 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =
𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦
PROFITABILITY RATIOS – MEASURE PERFORMANCE OF A BUSINESS IN TERMS
OF ITS ABILITY TO GENERATE PROFIT FROM OTS RESOURCES.
𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
NET – PROFIT RATIO – MEASURES PROFITABILITY AFTER
CONSIDERING ALL INCOME AND EXPENSES.