Financial Ratio Analysis Essay
5. Financial Ratio Analysis- Interpretation
AEON Company Berhad From the year 2012 to the year 2013, the current ratio of AEON has decreased by 0.12 times. The company has RM 0.79 in current assets for every ringgit in current liabilities in the year 2012 while it has RM 0.67 in current assets for every ringgit in current liabilities in the year 2013. This shows that the company may have problems paying its bills on time because the current ratio of these two years is below 1 which means the current liabilities exceed current assets. Moreover, the net profit margin has slightly increased by 0.01% from the year 2012 to the year 2013. This indicates that AEON is more effective in converting sales into actual profit in the year 2013. This is
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The company has used RM0.83 of liabilities for every RM 1.00 of equity financing in the year 2012 while it has used RM0.84 of liabilities for every RM1.00 of equity financing. This shows that AEON relies more on external lenders in the year 2013 if compared to the year 2012. For times interest earned ratio of AEON, the interest expense of the company are 0 times covered by its income before interest and tax in the year 2012 because there is no interest expense in this year. While, the interest expense of the company are 16301.25 times covered by its income before interest and tax in the year 2013.
Furthermore, the dividend yield has increased by 0.4% from the year 2012 to the year 2013. Based on the calculation in part 4, it shows that the company’s investors can earn 2.25% on their investment if they bought the common stock of AEON at current market price in the year 2012. However, they can earn 2.65% on their investment if they purchased the common stock of the company at current market price in the year 2013. This indicates that AEON has better position to pay a higher percentage to the stockholders on their investment in the form of annual dividends in the year
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