Assignment
Using the financial ratios calculated from the 2015 annual report of PVC Pipes, assess the short-term liquidity, operating efficiency, capital structure and long-term solvency and profitability of the firm.
|
Ratio
|
2015
|
2014
|
|
Current
|
1.52x
|
1.48x
|
|
Quick
|
1.01x
|
0.98x
|
|
Average collection period
|
65 days
|
58 days
|
|
Days inventory held
|
36 days
|
28 days
|
|
Days payable outstanding
|
61 days
|
47 days
|
|
Cash conversion cycle
|
40 days
|
39 days
|
|
Fixed asset turnover
|
4.91x
|
4.02x
|
|
Total asset turnover
|
1.70x
|
1.43x
|
|
Debt ratio
|
67.10%
|
63.08%
|
|
Long Term debt to total capitalization
|
46.82%
|
42.51%
|
|
Times interest earned
|
(5.10x)
|
I.65x
|
|
Fixed charge coverage
|
(2.34x)
|
1.40x
|
|
Cash flow adequacy
|
0.32x
|
0.87x
|
|
Gross profit margin
|
10.10%
|
12.81%
|
|
Operating profit margin
|
(5.93%)
|
2.75%
|
|
Net profit margin
|
(4.98%)
|
0.91%
|
|
Cash flow margin
|
3.84%
|
7.00%
|
|
Return on investment
|
(8.63%)
|
1.28%
|
|
Return on equity
|
(25.49%)
|
3.51%
|
|
Cash return on assets
|
6.90%
|
9.10%
|
Points to consider: (Please do not simply answer the questions below - they are meant to help you focus your ratio analysis but feel free to include add'l points as appropriate.)
How does short term liquidity look and what supports your assessment?
What do we see happening with the cash conversion cycle and associated components? Any implications of this from a policy perspective?
Would you assess the capital structure as risky or not risky considering any trends in long-term/total debt?
What is happening to CFO (cash flow from operations)?
Profitability assessment and where problems may or may not be impacting your assessment.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.