Informa's Web Ratios Explanation

Transcription

1 Informa's Web Ratios Explanation

2 Balance Ratios Working capital ( ) Current Assets - Current Liabilities The Working Capital represents the permanent funds part (Net Worth and Non Current Liabilities) that finance current activities of the company (Current Assets). Valued in Euros. Working capital ratio Working capital Assets The Working capital ratio indicates the proportion of the Assets that means the Working Capital. Shows if a Working capital is important in realtive terms. Soundness Ratio Equity Non-current Assets The soundness ratio indicates the proportion that Net Worth mean with respect to Non Current Assets. Indicates the proportion of Non Current Assets financed with net worth. The greater the value the greater the Soundness of the company when financing their long term investments with net worth. Average Collection Period (days) Clients + clients group and associated companies *360 Net Turnover The average collection period is the time indicator of the average time taking a company to collect their trade debtors (clients) payments. The higher the value the greater the company is financing its clients. Average Payment Period (days) Suppliers, group and associated companies *360 Supplies + External services (abbreviated and SMEs Suppliers + Other Operating expenses) The average payment period is the time indicator of the average time taking a company to pay their trade creditors (suppliers). The higher the value to a the greater the company is financing its trade creditors. 2

3 Liquidity Ratios Current Ratio (%) Current Assets *100 Current Liabilities The current ratio faces a company's current assets with the same nature liabilities, it reflects specifically the percentage that current assets mean with respect to short term liabilities. This result is much related to the working capital. Values under one hundred indicate that a part of the structure of the company (fixed assets) is being financed with external resources which may provoke difficulties to face liabilities with a shorter term. The farther from one hundred and closer to zero the worst. Quick Ratio (%) Cash and equivalents + Short Term Financial Investments *100 Current Liabilities Quick ratio measures the possibility of a company to face its short term payment obligations with the most liquid assets, this is to say, cash and equivalents and short term financial investments. It reflects the percentage that these assets mean with respect to short term liabilities. Low values in this ratio may indicate the existence of difficulties by the company to face short term commitments, while very high values might indicate liquidity excess that may identify a misuse of the resources of the company. 3

4 Debt Ratios Borrowing Percentage Ratio (%) Long term bank loans + Short Term debts + Long term debts with associated and affiliated companies + Short term debts with associated and affiliated companies *100 Net Worth + Liabilities The borrowing percentage ratio reflects the proportion of liabilities within all the company's non commercial liabilities. Greater values indicate that the company resorts to a greater extent to liabilities to finance its activity. External Financing Average Cost Ratio Financial Expenses and Other Financial Expenses Long term debts + Short Term debts + Long term debts with associated and affiliated companies + Short term debts with associated and affiliated companies The external financial average cost ratio reflects the proportion that debt cost means with respect to indebtedness of the company. Greater values reflect greater cost for the company when using liabilities to finance its activity; it means a greater debt financial burden. Debt Service Coverage Ratio Short and Long Term Debt + Short and Long term debts with Associated and Affiliated companies Cash Flow EFE (Cash Flow Status) there is no EFE (Cash Flow Status) Net cash or equivalents increase / reduction Exercise Results + Amortizations The debt service coverage ratio indicates the capacity of the company to face its indebtedness through liquid resources generated by its activity. Lower and positive values of this ratio indicate a better situation of the company to face its commitments through liquid resources generated by its activity. Interest Coverage Ratio Operating Result Financial Expenses and Other Financial Expenses 4

5 Interest Coverage Ratio shows the capacity of a company to generate sufficient resources coming from its activity to face the debt service. Greater and positive values of this ratio indicate a greater capacity of the company to face the cost off calling external financing to finance activities. 5

6 General and Activities Ratios Auto financing generated by sales Ratio (%) Cash Flow *100 Net Turnover EFE (Cash Flow Status) there is no EFE (Cash Flow Status) Net cash or equivalents increase / reduction Exercise Results + Amortizations The auto financing generated by sales ratio indicates the capacity of a company to turn the sale of its products or services into liquid resources. Greater and positive values of this ratio indicate a greater capacity of the company to turn its sales result into cash. Auto financing generated by Assets Ratio (%) Cash Flow *100 Total Assets EFE (Cash Flow Status) there is no EFE (Cash Flow Status) Net cash or equivalents increase / reduction Exercise Results + Amortizations The Auto financing generated by assets ratio indicates the capacity of the company to generate liquid resources from the use of its assets. Greater and positive values of this ratio do indicate a greater capacity of the company to generate liquid resources using its assets. Breakdown Point Ratio Net Turnover Net Turnover - Operating Result 6

7 The Breakpoint is the income level coming from company's ordinary activities (it does not take into account financial income) that it has to reach to stop having losses in the current exercise of its activities. Values greater than 1 would indicate that the company generates profits from the development of its activities. 7

8 Average Sales Volume per Employee Ratio Net Turnover Average staff The average sales volume per employee indicates the average resources generated by an employee in the analysed period. Greater values in this ratio would indicate greater staff productivity. Average Cost per Employee Ratio Labour cost Average staff The average cost per employee indicates the average staff expenses per employee in the analysed period. Assets Turnover Ratio Net Turnover Total Assets Assets Turnover compares sales income with the economic structure that has been used to obtain them. It is an always positive index. The greater the value to a greater extent is the company using its current resources to generate business. Inventory Turnover (days) Stocks *360 Supplies + Variation in stocks of finished goods and works in progress The Inventory turnover ratio indicates the number of sale days that the company could face with the current stock. Very low values could indicate a possible lack of capacity to face short term sale commitments, even a greater value could indicate that stocks are not being managed efficiently. 8

9 Results Ratios Return on Assets (ROA) (%) Operating Result *100 Total Assets Return on assets evaluate company's activities profit generation from the use of its assets. Its value is a percentage in which higher values are preferable as they indicate that the company makes an efficient use of its assets as it generates through it greater profits associated to its activity. Quite the opposite occurs with lower ratio values (that could even be negative). Operating Profitability (%) EBITDA *100 Total Assets The economic profitability measures the generation of gross operating profits, that is to say, before interests, taxes, depreciations and amortisations from the use of its assets. Its value is a percentage in which higher values are preferable as they indicate that the company makes an efficient use of its assets as it generates through it greater gross operating results. Quite the opposite occurs with lower ratio values (that could even be negative). Return on Equity (ROE) (%) Result before Tax *100 Net Worth Return on Equity is measured oriented to the shareholder, comparing profits before taxes with equity. Measured in a percentage in which higher and positive values are preferred (with no theoretical superior limit; although it would have an inferior one for bankruptcy possibility). 9

10 EBIT and EBITDA (Earnings before Interest and Tax) = Operating Result EBIT The EBIT or earnings before interest and tax is the result obtained by the company from its activities. A positive EBIT is a good indicator of the viability of the activity carried out by the company, specially in mature companies, as it indicates that the company is able to generate resources from its own activity. (Earning Before Interest, Tax, Depreciation and Amortization) = Operating Result + Amortizations EBITDA The EBITDA or earnings before interests, taxes, depreciations and amortizations could be defined as the gross operating profit and it is a much more refined way than the EBIT to infer the business viability calculated by the company as it removes concepts that may affect the operating result in a specific period and that do not need to indicate a non profitable business. Sometimes an EBITDA projection is used to evaluate companies. 10

11 Business Information w w w. i n f o r m a. e s Customer Service customerservice@informa.es