finance
Running head: FINANCIAL RATIOS 1
FINANCIAL RATIOS 5
Anfal Behbehani 32686
Dalia Alajmi 33335
Sarah Alsairafi 33013
Zainab Alramadhan 32771
F2
FIN300
AMERICAN UNIVERSITY OF MIDDLE EAST
FALL 2019
Anfal Behbehani 32686
Efficiency ratios for the year 2016 and 2017
|
A |
ABBV |
Ratio |
|
2,063,000/ [(575,000+ 533,000)/2] =3.72 |
7,040,000/[(1,605,000+ 1,444,000)/2]=5.61 |
Inventory turnover ratio=cost of goods sold/average inventory |
|
724,000/(4,472,000/365) =60 days |
5,088,000/(28,216,000/365) =66 days |
Day sale’s outstanding=account receivable/ (annual sales/365) |
|
4,472,000/(1,600,000-843,000)= 5.91
|
28,216,000/(8,071,000-5,268,000)=5.36 |
Fixed assets turnover =Net sales/ (fixed assets-accumulated Dep) |
|
4,472,000/[(8,426,000+ 7,802,000)/2] =0.55 |
28,216,000/[(70,786,000 + 66,099,000)/2] =0.41 |
Total assets turnover=Net sales /average total assets |
Source: Yahoo Finance
Operational efficiency ratios are used to determine how assets and other economic resources used by the firm. From the analysis above, Agile technologies Inc. is more efficient than ABBV because it has high inventory turnover, shorter time for collection of the cash for the items sold on credit and has higher total assets turnover ratio than ABBVIE. Therefore, considering that
out of the four ratios to measure efficiency, Agile technologies Inc. takes lead with three ratios, it is clear that (A), Inc uses assets prudently and efficiently.
Dalia Alajmi 33335
Leverage Ratios for the year 2017 and 2016
|
A 2017 |
ABVV 2017 |
A 2016 |
ABBV 2016 |
Ratio |
|
3,591,000/8,426,000= 0.43 |
65,689,000/70,786,000=0.93 |
3,556,000/7,802,000= 0.46 |
61,463,000/66,099,000 =0.93 |
Debts-to assets=debts/total assets |
|
841,000/79,000 =10.65 |
9,592,000/1,150,000 =8.34 |
615,000/72,000=8.54 |
9,384,000/1,047,000=8.97 |
Interest coverage=EBIT/interest expense |
Source: Yahoo Finance
Financial leverage ratios are used to measure the loan burden that is attributable to the firm. Agile technologies have lesser obligation compare to the ABBVIE across the two years. This is because both in 2017 and 2016, the percentage of the assets which are made of the debts is lower than ABBVIE which means firm (A), Inc is more stable financially than ABBVie. It is shocking to find that nearly all assets of the ABBVIE are made of the debts and liabilities. Finally, considering the interest coverage, (A), Inc has a higher ability to meet the interest on the loans using the liquid cash more comfortably than ABBVIE. Therefore, ABBVIE is more leveraged than (A), Inc.
Sarah Alsairafi 33013
Profitability Ratios 2017 and 2016
|
A 2017 |
ABVV 2017 |
A 2016 |
ABBV 2016 |
Ratio |
|
(2,409,000/ 4,472,000) * 100=53.87% |
(21,176,000/ 28,216,000)* 100=75% |
(2,197,000/ 4,202,000) *100 =52.3% |
(19,805,000/ 25,638,000)*100 =77% |
Gross Margin= (gross profit/net sales) *100 |
|
(684,000/ 4,472,000) * 100=15.3% |
(5,309,000/ 28,216,000)* 100=18.8% |
(462,000/ 4,202,000) *100 =11% |
(5,953,000/ 25,638,000)*100 =23% |
Net profit margin=(net income/net sales)*100 |
|
(684,000/ 8,426,000) * 100=8% |
(5,309,000/ 70,786,000)* 100=7.5% |
(462,000/ 7,802,000) *100 =5.9% |
(5,953,000/ 66,099,000)*100 =9% |
ROA=(net income/assets)*100 |
|
(684,000/ 4,831,000) * 100=14% |
(5,309,000/ 5,097,000) * 100=104%
|
462,000/4,243,000)* 100=10.89% |
(5,953,000/ 4,636,000) *100 =128% |
ROE=(Net income/shareholder’s equity)*100 |
Source: Yahoo Finance
Profitability ratios are used to determine how the firm generates revenues from the sales and from the use of the economic resources that are available to the firm. ABBV has a higher profit margin and net profit than Agile Technologies. Additionally, considering ROA and REO, ABBV is more profitable because higher returns can be realized from investment and assets when compared to the (A), Inc.
Zainab Alramadhan 32771
Market Ratios 2017 and 2016
|
A 2017 |
ABVV 2017 |
A 2016 |
ABBV 2016 |
Ratio |
|
34.024/1.130 =30.11 |
92.24/3.3 =27.95 |
72.95/2.1 =34.74 |
57.43/3.63 =15.82 |
P/E=Market value per share/annual EPS |
|
30.11/1.130 =26.65 |
27.95/3.3 =8.47 |
34.74/2.1 =16.54 |
15.82/3.63 =4.35 |
PEG=P/E/annual EPS |
Source: Yahoo Finance
Market ratios are extremely important because they are used to determine the value of the organization and determine if the financial instruments used by the firm will appreciate or not. Considering P/E and PEG, Agile Technologies Inc. is more valuable than ABBVIE. Investing in the (A), Inc will be pay than ABBV because returns are expected to grow, and its stocks have more value as indicated by the two market ratios that have been used.
In summary, when all ratios are put together, Agile Technologies incorporation is more stable, valuable and has a higher level of the operational efficiency which all act as a source of the motivation that would drive investors to consider investing in (A), Inc against ABBV.
References
1. Yahoo Finance. (2019). AbbVie Inc. (ABBV). Retrieved from https://finance.yahoo.com/quote/ABBV/history?p=ABBV
2. Yahoo Finance. (2019). AbbVie Inc. (ABBV). Retrieved from https://finance.yahoo.com/quote/ABBV/financials?p=ABBV
3. Yahoo Finance. (2019). AbbVie Inc. (ABBV). Retrieved from https://finance.yahoo.com/quote/ABBV/balance-sheet?p=ABBV
4. Yahoo Finance. (2019). Agilent Technologies, Inc. (A). Retrieved from https://finance.yahoo.com/quote/A/history?p=A
5. Yahoo Finance. (2019). Agilent Technologies, Inc. (A). Retrieved from https://finance.yahoo.com/quote/A/balance-sheet?p=A
6. Yahoo Finance. (2019). Agilent Technologies, Inc. (A).Retrieved from https://finance.yahoo.com/quote/A/financials?p=A