This report will be based on the Spritzer Group, one of the largest bottled water producers in Malaysia (Spritzer, 2010). This report will contain an analysis and evaluation of Spritzer Group based on the annual reports which contains the financial statements of the last 5 years from 2007 to 2011. The methods of analysis will be categorized in the main four financial ratios of the company which is to measure the profitability, liquidity, efficiency and gearing. The profitability ratios will measure how efficiently the company manages its operations and uses its assets to generate net income.
It consists of the profit margin, return on assets (ROA) and return on equity (ROE). The liquidity ratio which is also known as the short-term solvency focuses on the current assets and current liabilities, which is important to the short-term creditors, usually within a one year period. Hence, it comprises of the current ratio, quick ratio and cash ratio. The efficiency ratio is a measure of the asset management or turnover which is used to identify how the assets are used to generate sales.
It includes the inventory turnover, days’ sales in inventory, receivables turnover, days’ sales in receivables, total asset turnover and capital intensity. The gearing ratio is also known as the long-term solvency which discusses on the company’s long-run ability in order to meet its requirements. It consists of the total debt ratio, debt-equity ratio, equity multiplier, times interest earned ratio and cash coverage ratio (Jordan, Westerfield and Ross, 2011).
All of the calculations will be provided and can be found in this report. As follows, the results of the data analyzed shows that on a 5 year annualized basis, the ratios are most of the time in-line with the industry averages. In particular, some of the areas that have improved in comparative performance over the years are inventory turnover, profit margin, ROA and ROE. While the areas which are not performing too well are the liquidity and gearing.
Hence, some recommendations will include: to reduce borrowings to improve the liquidity, to improve the days’ sales in receivable as it has been quite constant for the last 5 years and rely less on creditors and debt financing to improve the gearing. The report finds that the company’s future will be capable of being stable as over the 5 years, it has been performing satisfactorily despite certain downfall in a few areas. As for the limitations, it will be further discussed in the conclusion of the report.