FINANCIAL STATEMENT ANALYSIS
In order to get a comprehensive analysis on SIA's financial statement analysis , we compared SIA's 5 financial year ending(FYE) results with the industry's average and 2 of its main competitors Cathay Pacific Airways and Qantas Airways . Cathay has been trailing closely to SIA in terms of first class cabin service and profitability for years. Qantas has long been dominating the highly profitable Kangaroo route and is ranked 5th in the world by Skytrax's survey . Please refer to appendix for the actual figures for every analysis below.
Liquidity Analysis
Current Ratio: SIA's current ratio is more than 50% above industry average and its competitors showing SIA's strong liquidity position in meeting its short term obligations. However, with the aggressive acquisition of 19 A380s, its current ratio is expected to drop in the next few years. This might not be a concern as the A380s is expected to bring more benefits than costs to SIA which will be explained in the next section.
Operational Efficiency Analysis
Assets Turnover Ratio: SIA's recorded significantly lower asset turnover ratio compared to the industry average and its competitors, showing that SIA is relatively ineffective in utilising its assets in generating sales.
Receivables Turnover: With a lower receivables turnover ratio than the industry, SIA should consider reviewing its credit policies to ensure timely collection of imparted credit that is not earning interest for the firm.
Profitability Analysis
Sales: SIA's revenue has been increasing for the last 2 years since FYE2005. However, this growth has slowed down from double digit growth to 8.6% recently. This is not a concern as SIA is still considered as one of the more profitable companies in the industry as shown in its Net Income and Operating profit ratios. With the new addition of A380s they will also be able to charge higher prices.
Return on Assets/Equity/Invested Capital: SIA's ROA is 4 times above industry average and significantly higher than its competitors. Its ROE and ROIC is also significantly higher than the industry. All 3 ratios have surpassed Cathay recently. This shows SIA management's capability in providing high returns for its shareholders now and the future.
Capital Structure Analysis (Solvency)
Debt to equity ratio: SIA's D/E ratio is significantly lower than the industry average and its competitors. It is financing its growth mainly with equity giving it a lower exposure to risks associated with interest rates.
Market Value Analysis
...s are doing well and over the many years have gone up. The company has not lawsuits currently pending which is good. The company as a whole seems to be growing even when the market is down.
Return on assets is also decreasing and less than industry average. For example, in 1995 it was 4.7%, less than the average of 6.
When analyzing the time interest earned ratio, the higher ratio is better. Since Jones Inc.’s most recent ratio is 2.7356, this means that they could cover their interest expenses about 2.7 times or that Jones Inc.’s income is about 2.7 times higher than interest expenses. Higher ratios are better because they indicate a company’s ability to honor their debt commitments; high ratios are less risky. Over time, Jones Inc. has maintained a ratio varying slightly around 1.75. This ratio has increased for Jones Inc. in the past year because they paid off significant debt. Before this increase, their ratio was a little lower than their competitor’s. An investor who is solely concerned with this ratio will prefer a company with the higher ratio. Now that Jones Inc. has surpassed its competitor, it is more attractive to investors. Depending on their future funding from debt, they should continue with the same ratio, and even increase
... this. Since 2009 the company has showed to increase its current ratio where it recorded an all-time high of 2.15 assets per 1 current liability. This was a significant point in the company, the high ratio showed the companies conservative strategy where majority of the cash was held back to fund acquisitions and fund its growth. The company remains to have a relatively high current ratio intact, as their main goal right now is to acquire and build new stores and make the whole foods brand more accessible all around the world.
The debt ratio is important for many reasons, but it should not be the basis of a company's future. The market will ultimately decide the value based on numerous factors, not just the bond rating. Growth Rate:.. HCA would like to see the annual growth rate in the 25-30% range, although they have also set a minimum of 13%. This would signal aggressive action in the company and with this growth rate HCA would experience a dramatic increase in ROE as well as leverage.
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
The competitors are around 0.5 for their cash flow adequacy ratio, which isn’t good, but when you compare it to Kodak, they are doing much better in handling their business obligations. Management Efficiency Eastman Kodak has a low accounts receivable turnover ratio. In 2014 it was 3.95. The low ratio signifies that Kodak might have a poor collecting process and should consider changing it.
...To check how successful it has been, we calculate debtor collection period ratio. (Dyson, 2004) Fixed Asset turnover: In this ratio, we seek the amount of sales that can be generated (or the amount of fixed assets necessary to achieve a level of sales) from a given level of fixed assets. (Klein, 1998) Total asset turnover: This ratio determines that how efficiently a firm is utilizing its assets. If the asset turnover ratio is high, the firm is using its assets effectively in generating sales. If this ratio is low, the firm may not be using its assets efficiently and shall either increase sales or eliminate some of the existing assets. (Argenti, 2002) Solvency Ratio Gearing: Gearing reflects the relationship between a company’s equity capital (ordinary shares and reserves) and its other form of long-term funding (preference share, debenture, etc.) (Black, 2000)
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
By taking into account only the most liquid assets, ratio 1.0 in 2013 and 2012, which increased by a small margin 0.2 from 2011, indicates that company has strong liquidity position.
Understanding the meaning of financial ratios is imperative to different stakeholders both within and outside of a company. Management reviews different ratios to measure how effective the strategies used to run the business are within a given time period. Money Managers and other types of investors use ratios to determine investment strategies in different types of companies. The use of the ratios helps give a consistent look at different types of businesses whether large or small and determine profitability and return on equity. The purpose of this paper is examine liquidity ratios as applied to three companies and gain understanding of how the ratios studied disclose liquidity positions.
Current ratio: This number is found by dividing the current assets by the current liabilities that is found on the balance sheet. The current ratio for 2010 was .666. This was calculated by $1550,631 / $2,326,966. The current ratio for 2011 was .905. This number was calculated by $1,543,816 / $1,705,132.
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.
This paper reveals the strategies that have been used by SIA, with backgrounds on their sustainability and sources of advantage, the way these strategies changed over the years and how to continue.
Singapore Airlines should remain competitive by providing better service and comfort to customers as in the long- term the market will grow.