Financial Analysis Of Energizer

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Recommended: Overview of financial statement analysis chapter 1 solutions

1. INTERNAL AND EXTERNAL ANALYSIS

1.1 Financial Statement Analysis

In order to evaluate the financial ratios, this document uses the following analyses to assess the financial statements of the company:

- Common size analysis: displays line items as a percentage of a common figure
- Base-year analysis: compares current data with that of previous year
- Trend analysis: compares the ratio of a firm across different years
- Peer group analysis: compares ratios across companies in the industry

1.1.1 Short-Term Solvency According to the common size analysis, for instance in 2015, the cash & cash equivalent is a major component of the balance sheet; since it represents 30.81% of total assets, which influence positively on the liquidity of …show more content…

Liquidity Ratios

On the other hand, the peer group analysis shows that Energizer’s liquidity ratio (i.e. Current ratio) is below the average of the industry. However, if Energizer is compared only to those competitors equivalent in size (i.e. Sales Revenue), its liquidity ratio is in a better position than that of equivalent competitors in the industry (see exhibit 2). Based on the peer group analysis, it can be said that Energizer’s liquidity is adequate.

Exhibit 2. Current Ratio

1.1.2 …show more content…

1.1.3 Return on Assets (ROA)

The trend analysis shows that Energizer’s ROA declined abruptly from 2014 to 2015 (see exhibit 7). According to the Income Statement analysis, this situation was caused not only by a decline in sales revenues and an increase in Selling, General & Administrative expenses, but also by the deconsolidation of its Venezuelan subsidiaries, which impacted severely the net income.

Exhibit 7. Trend Analysis ROA

On the other hand, the peer group analysis shows that Energizer’s ROA is below the average of the industry. However, if Energizer is compared only to those competitors equivalent in size (i.e. Sales Revenue), its ROA is closer to that of equivalent competitors in the industry (see exhibit 8). Therefore, it can be said that the major competitors of the industry, in general, were also negatively affected in the last year. Perhaps a higher level of competition in the market caused this situation, since the Sales revenues of competitors have also declined.

Exhibit 8. Peer Group Analysis ROA

1.1.4 Return on Equity

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