COMPANY XYZStrategic Financial Analysis

SUBMITTED BYABCSUBMITTED TO

PROF. XSSS SCHOOL OF BUSINESS MANAGEMENT

UNIVERSITY ONEIN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE SUBJECT

YYYYY INTRODUCTIONXYZ Corporation is registered with the ____________ on _______________, and its main office is located at ________________, __________. The Company was established to provide better solutions in solving environmental problems brought about by the DDDDD and hazardous _____ wastes. The Company also provides solutions for the environment-friendly disposal of hazardous industrial waste like chemicals. NATURE OF BUSINESS

The Company provides services in disposing infectious and hazardous medical wastes with the use of a locally-developed machine (called and branded as tttttt) that produces a very high temperature to convert or turn such wastes into ___________. This machine does not produce ________ that is common in burn technology machines (like incinerators).Health Care Waste Treatment in the FGGHHH: AN OVERVIEW

Based on a study of ADB in 2003, 30.37% of wastes coming from health care facilities are hazardous. It was estimated that a hospital generates an average of 0.34kg/bed/day of hazardous waste. Currently there are about 2,000 health care waste generators nationwide, including medical centers, hospitals and clinics. These health care facilities are responsible for the collection, handling, segregation, transport, treatment and disposal of the waste they produce.ORGANIZATIONAL STRUCTUREThe Table of Organization of the Company is shown next page.Figure 1. Table of Organization of xyZ Corporation

The President is the Chief Executive Officer of the Company. He also functions as the chief marketing officer of the Company. He is assisted by the VP Finance and Administration. The Finance and Administration Division has a very few staff due to the very low volume of transactions.

FINANCIAL MANAGEMENT PRACTICES CRITICAL TO SUCCESSThe Company continues manage its receivables and payables to take advantage of credit terms. For its accounts receivables, it bills its clients on a weekly basis instead of monthly. This reduces the collection period. Such terms were obtained by maintaining a good relationship with the.

For its payables, the Company maximizes the payment term granted by the suppliers. To assure its suppliers and to maintain fiscal discipline, the Company issues post dated checks, The discount terms are not availed of because these are very insignificant (cost of money is more expensive than the discount rate granted).

The Company only borrows money when the need arises at the lowest possible rates and pay them on time.

FINANCIAL ANALYSIS ON xyz COPORATIONThe audited financial statements of XYZ Corporation for years ended XXXX 31, 200N, 200P and 200Q are attached as Annex A and Annex B.Shown in the different tables are the following:1. Leverage Ratios2. Solvency Ratios

3. Liquidity Ratios

4. Operating Efficiency Ratios

Leverage Ratios

Leverage ratios measure the extent to which a company utilizes debt to finance growth. These ratios provide an indication of a companys long-term solvency. The debt to equity ratio provides an indication of a companys capital structure and whether the company is more reliant on borrowings (debt) or shareholder capital (equity) to fund assets and activities.

As can be seen in the table, the company is highly leveraged, where it used debt to acquire assets and for growth.

Solvency RatiosSolvency ratios measure the stability of the company and its ability to repay its debts. In the debt-to-equity ratio, if the ratio is 1 or more, it means that the capital provided by creditors is higher than those provided by the owners. For working capital, the amount should not be negative.

The above table shows that almost all of the funds used or invested came from creditors. As In this situation, the risk of the owners in the business is insignificant. The company had maximized the use of their creditors resources. However, a single error in the management of the accounts can boomerang negatively against the corporation.

The working capital of the company is a negative. It means that it cannot readily pay off its operating expenses and maturing or matured loans. If other underlying information are not provided to third parties, it can e immediately concluded that the company is insolvent. However, the actual condition of the company is very far from that because the owners are willing and are ready to infuse the needed working capital as needed.

It should be noted in the table below, however, that the solvency ratios are improving.

Liquidity Ratios

Liquidity ratios indicate whether a company has the ability to pay off short-term debt obligations (debts due to be paid within one year) as they fall due. Generally, a higher value is desired as this indicates greater capacity to meet debt obligations.

Current ratio, in simple terms, represents the number of units of current assets that are available for every unit of current liability. It measures the ability of the company to meet its maturing and due obligations. Based on the above table, the company does not have enough current assets to pay its current liabilities. By simply looking at the table, it looks that the company is in a very precarious financial condition. However, having known the company, it is not in a financial predicament in meeting its obligations since the shareholders are readily available and willing to lend the company the needed funds.Similarly, the quick ratio is worse than the current ratio. However, again, as explained above, the shareholders are ready to provide the needed funds anytime.It can be gleaned in the table below that the liquidity ratios of the company are improving. This was caused by the long-term loan obtained from a local bank.

The Liquidity Ratios are shown n the table below.

Profitability RatiosProfitability ratios measure the Companys performance and provide an indication of its ability to generate profits. It can be noted in the table below that the Profitability Ratio of the Company increase when compare to 2013. Also, the operating profit margin significantly increased in 2014. This was due to the increased in the number of clients, thus the volume of waste treated, in 2014.

Shown in the table below are the Operating Efficiency Ratios.

STRENGTHS AND WEAKNESES IN THE MANAGEMENT FINANCIAL FUNCTIONS

The Company has not properly planned the fabrication of the machines vis--vis the finalization and completion of their negotiations with their partners. As such, the Company ended up with certain number of units that are not yet operational. This was due to the overly optimistic expectations of the Company in their negotiations.

The Company is highly leveraged. As such, it cannot readily react to emerging opportunities. This was not addressed yet by the Company.

These weaknesses, however, are tempered by the good credit standing of the Company with its creditors and suppliers.

SWOT ANALYSISThe following are the significant actions to be taken to address noted strengths and weaknesses of the Company:DELETED

2

Sheet1

LIQUIDITY RATIOS

Current Ratios

Quick Ratios

Profit before depreciation andFormula:

amortisation to current liabilitiesProfit before depreciation and amortisation

(PDA CL) Profit beforePDACL =

Current liabilities

everage ratios, also referred to asTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

PROFITABILITY RATIOSFormula:

Earnings per shareNet income attributable to

common shareholders

EPS =

Total shares outstanding

Gross profit margin Gross profit margin tells

Formula:

Sales Cost of goods sold

Gross profit margin = x 100

Sales

Net profit margin Net profit margin meanwhile

Net income

Net profit margin = x 100

Sales

Return on assets (ROA )

Formula:

Net income

ROA = x 100

Average total assets

12. Return on equity (ROE ) Return on equity, commonly

referred to as ROE, is another

measurement of management

performance. ROE tells the investor how

well a company has used

Net income

ROE = x 100

Average shareholders equity

is

RAD GREEN SOLUTIONS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOMEANNEX B

COMMON SIZE

Amount of individual item

cYears Ended December 31COMMON SIZE RATIOSAmount of Base (Sales)

2013201220132012

NotesAmountAmount%age%age

1,812,785

REVENUES2P2,497,205P684,420100.00%100.00%2.6486441074

HORIZONTAL ANALYSIS

DIRECT COSTS2&101,469,660302,23858.85%44.16%AMOUNTCurrent year amount- Base year amount

GROSS PROFIT1,027,545382,18241.15%55.84%14.69%26.31%PERCENTAGE

Peso Change

OPERATING EXPENSES2&11888,975785,56635.60%114.78%Amount of item in Base year

INCOME (LOSS) FROM OPERATIONS138,570(403,384)4.00%-58.94%

INTEREST EXPENSE2&9108,5490.04.35%0.00%

NET PROFIT (LOSS)30,021(403,384)1.20%-58.94%

PROVISION FOR INCOME TAX2&120.00.0

NET INCOME P30,021P(403,384)1.20%-58.94%

See Notes To Financial Statements.

53.71

solvency

Solvency Ratios

AmountRatios

201420132012201420132012

Debt-to-Equity Ratio =

Total liabilities12,879,82812,282,5547,315,30016.3969176439:196.99:175.72:1

Shareholders' equity785,503126,63796,616

Working capital =

Current assets -834,037845,360647,377(305,791)(8,437,194)(6,667,923)

current liabilities1,139,8289,282,5547,315,300

leverage

Leverage Ratios

AmountRatios

201420132012201420132012

Debt to Equity Ratio =

Total Debt12,879,82812,282,5547,315,30016.40:196.99:175.72:19699.0247715912

Shareholders' Equity785,503126,63796,616

Total liabilities to total tangible assets =

Total Debt12,879,82812,282,5547,315,3000.94:10.99:10.99:1

Tangible assets13,665,33112,409,1917,411,916

everage ratios, also referred to asTotal debtTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' EquityShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

Liquidity

Liquidity Ratios

AmountRatios

201420132012201420132012

Current ratio =

Current Assets834,037845,3606473770.7317218036:10.09:10.09:19

Current Liabilities1,139,8289,282,5547315300

Quick ratio =

Quick Assets402,684336,944350,5770.3532848816:10.04:10.05:1

Current Liabilities1,139,8289,282,5547315300

operating

Efficiency Ratios

AmountRatios

2013201220132012

Profitability Ratio =Gross income1,027,545382,1820.41:10.56:1

Revenue2,497,205684,420

Operating Profit Margin (Loss) =Operating income138,570(403,384)0.06:1-0.59:1

Revenues2,497,205684,420

3. ProfitabilitySolvency Ratios

Gross incomeAmountRatios

Gross profit margin2013201220132012

Sales

=Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Operating incomeShareholders' equity126,63796616

Operating profit margin =

Sales

FinancialWorking capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

efficiency

Operating Efficiency Ratios

AmountRatios

201320132012201420132012

Profitability Ratio =

Gross income1,962,2421,027,545382,1820.49:10.41:10.56:1

Revenue3,989,9192,497,205684,420

Operating Profit Margin (Loss) =

Operating income899,763138,570(403,384)0.23:10.06:1-0.59:1

Revenues3,989,9192,497,205684,420

Solvency Ratios

AmountRatios

2013201220132012

Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Shareholders' equity126,63796616

Working capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

Sheet1

LIQUIDITY RATIOS

Current Ratios

Quick Ratios

Profit before depreciation andFormula:

amortisation to current liabilitiesProfit before depreciation and amortisation

(PDA CL) Profit beforePDACL =

Current liabilities

everage ratios, also referred to asTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

PROFITABILITY RATIOSFormula:

Earnings per shareNet income attributable to

common shareholders

EPS =

Total shares outstanding

Gross profit margin Gross profit margin tells

Formula:

Sales Cost of goods sold

Gross profit margin = x 100

Sales

Net profit margin Net profit margin meanwhile

Net income

Net profit margin = x 100

Sales

Return on assets (ROA )

Formula:

Net income

ROA = x 100

Average total assets

12. Return on equity (ROE ) Return on equity, commonly

referred to as ROE, is another

measurement of management

performance. ROE tells the investor how

well a company has used

Net income

ROE = x 100

Average shareholders equity

is

RAD GREEN SOLUTIONS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOMEANNEX B

COMMON SIZE

Amount of individual item

cYears Ended December 31COMMON SIZE RATIOSAmount of Base (Sales)

2013201220132012

NotesAmountAmount%age%age

1,812,785

REVENUES2P2,497,205P684,420100.00%100.00%2.6486441074

HORIZONTAL ANALYSIS

DIRECT COSTS2&101,469,660302,23858.85%44.16%AMOUNTCurrent year amount- Base year amount

GROSS PROFIT1,027,545382,18241.15%55.84%14.69%26.31%PERCENTAGE

Peso Change

OPERATING EXPENSES2&11888,975785,56635.60%114.78%Amount of item in Base year

INCOME (LOSS) FROM OPERATIONS138,570(403,384)4.00%-58.94%

INTEREST EXPENSE2&9108,5490.04.35%0.00%

NET PROFIT (LOSS)30,021(403,384)1.20%-58.94%

PROVISION FOR INCOME TAX2&120.00.0

NET INCOME P30,021P(403,384)1.20%-58.94%

See Notes To Financial Statements.

53.71

liquidity

Liquidity Ratios

AmountRatios

2013201220132012

Current ratio =Current Assets845,3606473770.09:10.09:19

Current Liabilities9,282,5547315300

Quick ratio =Quick Assets336,944350,5770.04:10.05:1

Current Liabilities9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

efficiency

Liquidity Ratios

AmountRatios

2013201220132012

Current ratio =Current Assets845,3606473770.09:10.09:19

Current Liabilities9,282,5547315300

Quick ratio =Quick Assets336,944350,5770.04:10.05:1

Current Liabilities9,282,5547315300

operating

Efficiency Ratios

AmountRatios

2013201220132012

Profitability Ratio =Gross income1,027,545382,1820.41:10.56:1

Revenue2,497,205684,420

Operating Profit Margin (Loss) =Operating income138,570(403,384)0.06:1-0.59:1

Revenues2,497,205684,420

3. ProfitabilitySolvency Ratios

Gross incomeAmountRatios

Gross profit margin2013201220132012

Sales

=Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Operating incomeShareholders' equity126,63796616

Operating profit margin =

Sales

FinancialWorking capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

solvency

Liquidity Ratios

AmountRatios

2013201220132012

Current ratio =Current Assets845,3606473770.09:10.09:19

Current Liabilities9,282,5547315300

Quick ratio =Quick Assets336,944350,5770.04:10.05:1

Current Liabilities9,282,5547315300

operating

Efficiency Ratios

AmountRatios

2013201220132012

Profitability Ratio =Gross income1,027,545382,1820.41:10.56:1

Revenue2,497,205684,420

Operating Profit Margin (Loss) =Operating income138,570(403,384)0.06:1-0.59:1

Revenues2,497,205684,420

3. ProfitabilitySolvency Ratios

Gross incomeAmountRatios

Gross profit margin2013201220132012

Sales

=Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Operating incomeShareholders' equity126,63796616

Operating profit margin =

Sales

FinancialWorking capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

leverage

Leverage Ratios

AmountRatios

201420132012201420132012

Debt to Equity Ratio =

Total Debt12,879,82812,282,5547,315,30016.40:196.99:175.72:19699.0247715912

Shareholders' Equity785,503126,63796,616

Total liabilities to total tangible assets =

Total Debt12,879,82812,282,5547,315,3000.94:10.99:10.99:1

Tangible assets13,665,33112,409,1917,411,916

everage ratios, also referred to asTotal debtTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' EquityShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

Sheet1

LIQUIDITY RATIOS

Current Ratios

Quick Ratios

Profit before depreciation andFormula:

amortisation to current liabilitiesProfit before depreciation and amortisation

(PDA CL) Profit beforePDACL =

Current liabilities

everage ratios, also referred to asTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

PROFITABILITY RATIOSFormula:

Earnings per shareNet income attributable to

common shareholders

EPS =

Total shares outstanding

Gross profit margin Gross profit margin tells

Formula:

Sales Cost of goods sold

Gross profit margin = x 100

Sales

Net profit margin Net profit margin meanwhile

Net income

Net profit margin = x 100

Sales

Return on assets (ROA )

Formula:

Net income

ROA = x 100

Average total assets

12. Return on equity (ROE ) Return on equity, commonly

referred to as ROE, is another

measurement of management

performance. ROE tells the investor how

well a company has used

Net income

ROE = x 100

Average shareholders equity

is

RAD GREEN SOLUTIONS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOMEANNEX B

COMMON SIZE

Amount of individual item

cYears Ended December 31COMMON SIZE RATIOSAmount of Base (Sales)

2013201220132012

NotesAmountAmount%age%age

1,812,785

REVENUES2P2,497,205P684,420100.00%100.00%2.6486441074

HORIZONTAL ANALYSIS

DIRECT COSTS2&101,469,660302,23858.85%44.16%AMOUNTCurrent year amount- Base year amount

GROSS PROFIT1,027,545382,18241.15%55.84%14.69%26.31%PERCENTAGE

Peso Change

OPERATING EXPENSES2&11888,975785,56635.60%114.78%Amount of item in Base year

INCOME (LOSS) FROM OPERATIONS138,570(403,384)4.00%-58.94%

INTEREST EXPENSE2&9108,5490.04.35%0.00%

NET PROFIT (LOSS)30,021(403,384)1.20%-58.94%

PROVISION FOR INCOME TAX2&120.00.0

NET INCOME P30,021P(403,384)1.20%-58.94%

See Notes To Financial Statements.

53.71

solvency

Solvency Ratios

AmountRatios

201420132012201420132012

Debt-to-Equity Ratio =

Total liabilities12,879,82812,282,5547,315,30016.3969176439:196.99:175.72:1

Shareholders' equity785,503126,63796,616

Working capital =

Current assets -834,037845,360647,377(305,791)(8,437,194)(6,667,923)

current liabilities1,139,8289,282,5547,315,300

leverage

Leverage Ratios

AmountRatios

201420132012201420132012

Debt to Equity Ratio =

Total Debt12,879,82812,282,5547,315,30016.40:196.99:175.72:19699.0247715912

Shareholders' Equity785,503126,63796,616

Total liabilities to total tangible assets =

Total Debt12,879,82812,282,5547,315,3000.94:10.99:10.99:1

Tangible assets13,665,33112,409,1917,411,916

everage ratios, also referred to asTotal debtTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' EquityShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

Liquidity

Liquidity Ratios

AmountRatios

201420132012201420132012

Current ratio =

Current Assets834,037845,3606473770.7317218036:10.09:10.09:19

Current Liabilities1,139,8289,282,5547315300

Quick ratio =

Quick Assets402,684336,944350,5770.3532848816:10.04:10.05:1

Current Liabilities1,139,8289,282,5547315300

operating

Efficiency Ratios

AmountRatios

2013201220132012

Profitability Ratio =Gross income1,027,545382,1820.41:10.56:1

Revenue2,497,205684,420

Operating Profit Margin (Loss) =Operating income138,570(403,384)0.06:1-0.59:1

Revenues2,497,205684,420

3. ProfitabilitySolvency Ratios

Gross incomeAmountRatios

Gross profit margin2013201220132012

Sales

=Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Operating incomeShareholders' equity126,63796616

Operating profit margin =

Sales

FinancialWorking capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

efficiency

Operating Efficiency Ratios

AmountRatios

201320132012201420132012

Profitability Ratio =

Gross income1,962,2421,027,545382,1820.49:10.41:10.56:1

Revenue3,989,9192,497,205684,420

Operating Profit Margin (Loss) =

Operating income899,763138,570(403,384)0.23:10.06:1-0.59:1

Revenues3,989,9192,497,205684,420

Solvency Ratios

AmountRatios

2013201220132012

Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Shareholders' equity126,63796616

Working capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

Sheet1

LIQUIDITY RATIOS

Current Ratios

Quick Ratios

Profit before depreciation andFormula:

amortisation to current liabilitiesProfit before depreciation and amortisation

(PDA CL) Profit beforePDACL =

Current liabilities

everage ratios, also referred to asTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

PROFITABILITY RATIOSFormula:

Earnings per shareNet income attributable to

common shareholders

EPS =

Total shares outstanding

Gross profit margin Gross profit margin tells

Formula:

Sales Cost of goods sold

Gross profit margin = x 100

Sales

Net profit margin Net profit margin meanwhile

Net income

Net profit margin = x 100

Sales

Return on assets (ROA )

Formula:

Net income

ROA = x 100

Average total assets

12. Return on equity (ROE ) Return on equity, commonly

referred to as ROE, is another

measurement of management

performance. ROE tells the investor how

well a company has used

Net income

ROE = x 100

Average shareholders equity

is

RAD GREEN SOLUTIONS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOMEANNEX B

COMMON SIZE

Amount of individual item

cYears Ended December 31COMMON SIZE RATIOSAmount of Base (Sales)

2013201220132012

NotesAmountAmount%age%age

1,812,785

REVENUES2P2,497,205P684,420100.00%100.00%2.6486441074

HORIZONTAL ANALYSIS

DIRECT COSTS2&101,469,660302,23858.85%44.16%AMOUNTCurrent year amount- Base year amount

GROSS PROFIT1,027,545382,18241.15%55.84%14.69%26.31%PERCENTAGE

Peso Change

OPERATING EXPENSES2&11888,975785,56635.60%114.78%Amount of item in Base year

INCOME (LOSS) FROM OPERATIONS138,570(403,384)4.00%-58.94%

INTEREST EXPENSE2&9108,5490.04.35%0.00%

NET PROFIT (LOSS)30,021(403,384)1.20%-58.94%

PROVISION FOR INCOME TAX2&120.00.0

NET INCOME P30,021P(403,384)1.20%-58.94%

See Notes To Financial Statements.

53.71

solvency

Solvency Ratios

AmountRatios

201420132012201420132012

Debt-to-Equity Ratio =

Total liabilities12,879,82812,282,5547,315,30016.3969176439:196.99:175.72:1

Shareholders' equity785,503126,63796,616

Working capital =

Current assets -834,037845,360647,377(305,791)(8,437,194)(6,667,923)

current liabilities1,139,8289,282,5547,315,300

leverage

Leverage Ratios

AmountRatios

201420132012201420132012

Debt to Equity Ratio =

Total Debt12,879,82812,282,5547,315,30016.40:196.99:175.72:19699.0247715912

Shareholders' Equity785,503126,63796,616

Total liabilities to total tangible assets =

Total Debt12,879,82812,282,5547,315,3000.94:10.99:10.99:1

Tangible assets13,665,33112,409,1917,411,916

everage ratios, also referred to asTotal debtTotal debt

LEVERAGE RATIOSgearing ratios, measure the extentShareholders' EquityShareholders' Equity

to which a company utilises debt

to finance growth. Leverage ratios can

provide an indication of a companys

long-term solvency. Whilst most

financial experts will acknowledge that

debt is a cheaper form of financing than

equity, debt carries risks and investors

need to be aware of the extent of this

risk.

5. Debt to equity

The higher the value of the TLTAI ratio,

the higher the level of risk. In this case,

the company is exposed to a high level

of risk because it has $1.60 in liabilities

for every $1 in tangible assets.

The higher the value of the

TLTAI ratio, the higher the

level of risk.

Chapter 4

Leverage ratios

Formula:

Total liabilities

TLTAI =

Total tangible assets

Example:

$800,000

TLTAI =

$500,000

TLTAI =

Interest cover ratios

Formula:

Net profit before tax + interest

Interest cover =

Interest

Liquidity

Liquidity Ratios

AmountRatios

201420132012201420132012

Current ratio =

Current Assets834,037845,3606473770.7317218036:10.09:10.09:19

Current Liabilities1,139,8289,282,5547315300

Quick ratio =

Quick Assets402,684336,944350,5770.3532848816:10.04:10.05:1

Current Liabilities1,139,8289,282,5547315300

operating

Efficiency Ratios

AmountRatios

2013201220132012

Profitability Ratio =Gross income1,027,545382,1820.41:10.56:1

Revenue2,497,205684,420

Operating Profit Margin (Loss) =Operating income138,570(403,384)0.06:1-0.59:1

Revenues2,497,205684,420

3. ProfitabilitySolvency Ratios

Gross incomeAmountRatios

Gross profit margin2013201220132012

Sales

=Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Operating incomeShareholders' equity126,63796616

Operating profit margin =

Sales

FinancialWorking capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300

LIQUIDITY RATIOS

Current Assets

CURRENT RATIO=

Current Liabilities

OPERATING CASH FLOW TO CURRENT LIABILITIES

efficiency

Operating Efficiency Ratios

AmountRatios

201320132012201420132012

Profitability Ratio =

Gross income1,962,2421,027,545382,1820.49:10.41:10.56:1

Revenue3,989,9192,497,205684,420

Operating Profit Margin (Loss) =

Operating income899,763138,570(403,384)0.23:10.06:1-0.59:1

Revenues3,989,9192,497,205684,420

Solvency Ratios

AmountRatios

2013201220132012

Debt-to-Equity Ratio =Total liabilities12,282,5547,315,30096.99:175.72:1

Shareholders' equity126,63796616

Working capital =Current assets - current liabilities845,360647,377(8,437,194)(6,667,923)

9,282,5547315300