Finance

Financial ratios are powerful tools of company analysis and in most cases they are useful in decision making (Hoskin, Fizzell & Cherry, 2014). There are numerous financial rations depending on the aspect of comparison under question. Just like any other company, Manpower company is not exceptional and therefore its analysis cannot go without some financial ratios (Hoskin, Fizzell & Cherry, 2014). Using these ratios, it would be important to compare Manpower with other companies as well as with the industry benchmarks.

Liquidity Ratios

1. Current ratios. It is also referred as working capital ratio.it is used to test whether the current assets can cover the current liabilities. Given by; Currents Assets/Current Liabilities (Hoskin, Fizzell & Cherry, 2014).

a) 2015. Current ratio= 176664/268728; 0.6

b) 2014. Current ratio=168769/263101;0.64

This shows the company is able to cover its current liability. There is a slight increase in liabilities in 2015 but the current assets are still higher than liabilities

2. Quick ratio. It measures the most liquid current assets that can cover up current liabilities. Given by, Cash equivalents +short term investments + receivables /Current Liabilities (Hoskin, Fizzell & Cherry, 2014).

a) 2015. Quick ratio= 98107+96557+60927/268729; 0.95

b) 2014. Quick ratio=95452+77182+54494/263101;0.86

In 2015, the current assets were higher than 2014 as a result mainly of cash in bank and higher receivables

Efficiency Ratio

1. Accounts receivable turnover ratio. It is given by; total annual sales/ accounts receivable

a) 2015.Accounts receivable turnover ratio=154885/60927;2.24

b) 2014. Accounts receivable turnover ratio= 139894/54494;2.57

The company made more sales in 2014 than 2015

2. Inventory turnover ratio. It is given by the Cost of Goods sold/average inventory (Hoskin, Fizzell & Cherry, 2014).

In 2014 the ratio was 4.6 and in 2015 is at 4.94 this shows that more sales have been made in 2015 than in 2014

Leverage ratios

1. Debt ratio. This is calculated by ; Total liabilities /Total Assets (Hoskin, Fizzell & Cherry, 2014)

In 2015 debt ratio was 6.53 this is the number of assets financed by debt in 2014

2. Debt-equity ratio. Compares the company’s debt to shareholders equity. Given by; total liabilities/Shareholder Equity

Man power shareholding that has been financed by debt is 13.75 in 2015 up from 12. 96 in 2014

Profitability Ratios:

This is the measure of the company’s profitability through its ability to make profit for the company operations and for the shareholders (Hoskin, Fizzell & Cherry, 2014).

1. Gross margin. It shows the profitability of goods and services. The profit that the company retains after incurring the direct cost. How much it costs to produce goods. Given by Gross profit/Net sales*100

The cost of producing goods in manpower in 2015 was at 12.97 %

Return on assets. It shows effective the business can obtain income from its assets. Given by; Net Income/assets*100. This is also the rate of liquidation where manpower can convert its assets into income. In 2015 it was at 17.97%

Market value indicator

1. Earnings per share. This would refer to incomes of shareholders if shares were to be sold. It is given by; total profits/shares (Hoskin, Fizzell & Cherry, 2014)

2015 652.5/465.8=1.4

2014 699.2/466.3= 1.5

The shareholders will earn more in 2014 per shareholding than 2015, however the year’s final quarter are not yet out and could be a determiner in shareholders earnings

References

Hoskin, R. E., Fizzell, M. R., & Cherry, D. C. (2014). Financial accounting: a user perspective. Wiley Global Education.