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PAMANTASAN NG LUNGSOD NG MAYNILA

Foodrich Financial ratios

Enterprise Analysis

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Current ratio

Current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations.

The ratio is mainly used to give an idea of the company's ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher

the current ratio, the more capable the company is of paying its obligations. A ratio under 1

suggests that the company would be unable to pay off its obligations if they came due at that

point. While this shows the company is not in good financial health, it does not necessarily mean

that it will go bankrupt - as there are many ways to access financing - but it is definitely not a

good sign.

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to

turn its product into cash. Companies that have trouble getting paid on their receivables or have

long inventory turnover can run into liquidity problems because they are unable to alleviate their

obligations.

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While the data above shows that Foodrich's current ratio is above the industry average, thus

making Foodrich more liquid than its competitors, it may also mean that Foodrich is not efficient

in utilizing its asset. It may mean that Foodrich has too much idle assets or cash which can be put

into productive use.

Quick Ratio / Acid test ratio

A stringent indicator that determines whether a firm has enough short-term assets to cover its

immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the

working capital ratio, primarily because the working capital ratio allows for the inclusion of

inventory assets.

Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at

with extreme caution. Furthermore, if the acid-test ratio is much lower than the working capital

ratio, it means current assets are highly dependent on inventory. Retail stores are examples of

this type of business.

Foodrich's quick ration fluctuates in three years span. In 2013 the quick ratio of Foodrich is

below the industry average which may indicate liquidity problems of Foodrich. If we look at the

current ratio ofFoodrich, the current ratio of Foodrich is way above the industry average but the

same is not true for the quick ratio of the Foodrich which means that Foodrich is highly

dependent of inventories. Since inventories is the more difficult asset to sell Foodrich may

experience liquidity problems in the near future especially if demand for their products

decreases.

ROA

Return on asset is an indicator of how profitable a company is relative to its total assets. ROA

gives an idea as to how efficient management is at using its assets to generate earnings.

Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a

percentage.

ROA tells you what earnings were generated from invested capital (assets). The assets of the

company are comprised of both debt and equity. Both of these types of financing are used tofund the operations of the company. The ROA figure gives investors an idea of how effectivelythe company is converting the money it has to invest into net income. The higher the ROAnumber, the better, because the company is earning more money on less investment. Forexample, if one company has a net income of $1 million and total assets of $5 million, its ROAis 20%; however, if another company earns the same amount but has total assets of $10 million,it has an ROA of 10%. Based on this example, the first company is better at converting itsinvestment into profit.

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The ROA of Foodrich is almost double the industry average which makes Foodrich moreefficient in converting the assts of Foodrich into net income than its competitors.

Return on Equity

Return on equity measures a corporation's profitability by revealing how much profit a companygenerates with the money shareholders have invested.

The ROE of Foodrich indicates that Foodrich is less efficient in utilizing the contributions of itsinvestors. This may also indicate that Foodrich is more dependent in utilizing debts rather thanequity contributions of investors to generate income. This will be more apparent when we alsolook at the ROA of Foodrich. As said above, ROA of Foodrich is almost double the industryaverage.

Return on Sales

A ratio widely used to evaluate a company's operational efficiency. ROS is also known as afirm's "operating profit margin". This measure is helpful to management, providing insight intohow much profit is being produced per unit currency of sales. As with many ratios, it is best tocompare a company's ROS over time to look for trends, and compare it to other companies in theindustry. An increasing ROS indicates the company is growing more efficient, while adecreasing ROS could signal looming financial troubles.

Foodrich's ROS is below the inductry average but does not deviate much. While Foodrich's

financil ratio would indicate that Foodrich may be less efficient, it does not make them totally

inefficient since there is only a slight difference from the industry average. However, to improvethis Foodrich needs to evaluate its operating procedures or processes ad remove all unnecessary

or non-value adding activities.

Debt to asset ratio / Debt Ratio

This is a financial ratio that measures the extent of a companys or consumers leverage. The

debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be

interpreted as the proportion of a companys assets that are financed by debt.

A debt ratio of greater than 1 indicates that a company has more debt than assets. Meanwhile, a

debt ratio of less than 1 indicates that a company has more assets than debt.

Not surprisingly, the debt ratio of Foodrich is higher than industry average. As said above,

Foodrich is more dependent in utilizing funds sourced from debts rather that funds fueled by its

shareholders. As such, the debt ratio of Foodrich is higher than the industry average.

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Debt to equity ratio

It is a measure of a company's financial leverage calculated by dividing its total liabilities by

stockholders' equity. It indicates what proportion of equity and debt the company is using tofinance its assets.

A high debt/equity ratio generally means that a company has been aggressive in financing its

growth with debt. This can result in volatile earnings as a result of the additional interest

expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could

potentially generate more earnings than it would have without this outside financing. If this were

to increase earnings by a greater amount than the debt cost (interest), then the shareholders

benefit as more earnings are being spread among the same amount of shareholders. However, thecost of this debt financing may outweigh the return that the company generates on the debt

through investment and business activities and become too much for the company to handle.

This can lead to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example,

capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2,

while personal computer companies have a debt/equity of under 0.5.

The debt ratio of Foodrich is higher than the industry average. It also indicates that Foodrich is

more dependent on financing its company from debts rather than equity. While financing acompany would entail additional inerest expense, studies have shown that it is more costly to

finance a company with equity. Foodrich is not in a capital intensive industry thus its debt ratio is

not more than 1.

Receivables turnover

This is an accounting measure used to quantify a firm's effectiveness in extending credit as well

as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently

a firm uses its assets.

By maintaining accounts receivable, firms are indirectly extending interest-free loans to theirclients. A high ratio implies either that a company operates on a cash basis or that its extension

of credit and collection of accounts receivable is efficient.

A low ratio implies the company should re-assess its credit policies in order to ensure the timely

collection of imparted credit that is not earning interest for the firm.

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The receivable turnover of Foodrich is almost double the industry average. This may indicate

that Foodrich is very efficient in collecting its receivables. However, if this ratio is too high this

may push away valued clients.

Average days receivable / Average collection period

The approximate amount of time that it takes for a business to receive payments owed, in terms

of receivables, from its customers and clients.

Due to the size of transactions, most businesses allow customers to purchase goods or services

via credit, but one of the problems with extending credit is not knowing when the customer will

make cash payments. Therefore, possessing a lower average collection period is seen as optimal,

because this means that it does not take a company very long to turn its receivables into cash.

Ultimately, every business needs cash to pay off its own expenses (such as operating and

administrative expenses).

Foodrich has a collection problem. It takes too long for Foodrich to collect from his debtors. On

the other hand, this may be the reason why more consumers are more willing to transact with

Foodrich because Foodrich ectends more days as credit allowace to its customers.

Inventory turnover

A ratio showing how many times a company's inventory is sold and replaced over a period. The

days in the period can then be divided by the inventory turnover formula to calculate the days it

takes to sell the inventory on hand or "inventory turnover days.".

This ratio should be compared against industry averages. A low turnover implies poor sales and,therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.

Foodrich has high inventory which indicates that Foodrich has stong sales.