Apex Tannery Ltd. Ratio Analysis

APEX TANNERY LTD.
RATIO ANALYSIS
Profitability Ratio:
1. Mark-up Ratio: (Gross Profit * 100)/ Cost of Goods Sold
Details Values 2016-17 Values 2017-18 Values 2018-19
2016-17 % 2017-18 % 2018-19 %
Mark Up (260,576 * 15.407 % (318,408* 15.19 % (289,489 * 16.527 %
(Gross Profit * 100)/ 100)/ 100)/
100)/ Cost of 1,691,237 2,095,527 1,751,594
Goods Sold
Comment: Although in 2017 the company made the highest gross profit followed by 2018
and 2016, but according to the mark-up ratio, when the gross profit is compared to the cost
of goods sold by the company it made a better gross profit in 2018 and 2016 than in 2017.
This is because the cost of goods sold in 2018 is the least among the three years followed by
the cost of goods sold of 2016 and then 2017. So according to the companys mark-up ratio
we can say that in 2017 the companys gross profit level decreased than 2016 and then its
gross profit level increased in 2018 which was even greater than the gross profit of 2016.
2. Margin or Gross Profit percentage: (Gross Profit *100)/ Net

Sales
2016-17 % 2017-18 % 2018-19 %
Margin (260,576* 13.350 % (318,408* 13.190 % (289,489* 14.183 %
(Gross Profit * 100)/ 100)/ 100)/
100)/ 1,951,813 2,413,935 2,041,083
Net Sales
Comment: Although in 2018 the company made less sales than 2017 but more sales than
2016, the cost of goods sold of 2018 is very less compared to that of both 2016 and 2017 so
compared to the net sales, the company made the highest gross profit in 2018. Similarly
although in 2016 the company made less sales than 2017 but the cost of goods sold of the
company in 2016 is very less compared to that of 2017, as a result when compared to the
net sales the company made a better gross in 2016 than it did in 2017 due to its high cost of
goods sold.
3. Net Profit to sales ratio or net profit percentage: (Net profit
* 100)/ Net Sales

2016-17 % 2017-18 % 2018-19 %
Net Profit to (45,028 * 2.307 % (38,600 * 1.599 % (21,522 * 1.054 %
sales ratio 100)/ 100)/ 100)/
(Net Profit * 1,951,813 2,413,935 2,041,083
100)/
Net Sales
Comment: Even though the company made the highest sales in 2017, and then in 2018 with
2016 having the least amount of sales, however it has the highest net profit rate in 2016
followed by in 2017 and then in 2018. The company must have had better control over its
operating expenses in 2016 than in 2017 similarly it had better control over its operating
expenses in 2017 than in 2018. This suggests that the companies operating expenses
increased every year from 2016 to 2018 which reduced its overall net profit.
4. Return on Capital Employed: (Net Profit * 100)/ Capital

Employed

2016-17 % 2017-18 % 2018-19 %
Return on (45,028* 3.768 % (38,600 * 3.230 % (21,522 * 1.847 %
capital 100)/ 100)/ 100)/
employed 1,194,926 1,194,94 1,165,376
(Net Profit* 2
100)/
Capital
Employed
Comment: Back in 2016 the company got back 3.768 Tk for every 100 Tk it invested which is
significantly higher than the amounts it got back in both 2017 and 2018 for the same
investment. In 2017 although the companies return to its capital employed reduced from
2016 but it got 3.230 Tk for ever 100 Tk investment which is also significantly higher than
the return on investment in 2018 which was 1.847 Tk return for the same investment. This
shows that the companies operating expenses has increased drastically throughout every
year from 2016 to 2018 which has in return reduced the companies net profit and lowered
the companies return on investments.
5. Return on Capital Invested: (Net Profit * 100)/ Owners
Capital

2016-17 % 2017-18 % 2018-19 %
Return on (45,028 * 4.186 % (38,600 * 4.664 % (21,522 * 2.122 %
Capital Invested 100)/ 100)/ 100)/
(Net Profit * 1,075,809 1,053,449 1,014,011
100)/ Owners
Capital
Comment: Although the company made the highest net profit in 2016 followed by 2017 and
then 2018, however when compared to the capital invested, the rate of return of net profit
per capital investment is higher in the year 2017 followed by 2016 and then 2018. This is
due to the decrease in reserve capital such as Dividend equalization fund in 2017, which
caused the owners overall capital to reduce in 2017 compared to that of 2016, thus the
return of profit is high in 2017 than in 2016 compared to the capital invested by the
company in both the years. Similarly the capital invested by the company in 2016 was a bit
more compared to that of 2018 but the net profit made by the company in 2016 was
significantly more when compared to that of 2018 so the rate of return of net profit for per
capital investment is more in 2016 than in 2018. Judging on this information it can be
concluded that the rate of profit return of the company when compared to the capital
invested by it is highest in 2017 followed by 2016 and then 2018.
Liquidity Ratio:
1. Current Ratio: Current Asset: Current Liabilities (Standard-value =
2:1)

2016-17 2017-18 2018-19
Current Ratio (1,095,562/ 0.965:1 (1,141,565/ 0.928:1 (1,492,010/ 0.967:1
(Current Assets: 1,135,867): 1,230,337): 1,543,930):
Current (1,135,867/ (1,230,337/ (1,543,930/
Liabilities) 1,135,867) 1,230,337) 1,543,930)
Comment: In all the three years from 2016 to 2018 the company is very farm from achieving
the standard value which is 2:1. So in all three years the company will face difficulty in
working capital management and repay its liabilities. However among all the three years. In
all the three years the companies value of liabilities exceeds the value of its assets which
clearly represents that the company is in loss.
2. Acid Test Ratio: (Current Assets – Inventory): Current Liabilities

(Standard value = 1.1:1)

2016-17 2017-18 2018-19
Acid Test Ratio (1,095,562 0.336:1 (1,141,565 0.285:1 (1,492,010 0.236:1
(Current – - –
Assets – 713,771)/ 791006)/ 1128572)/
Inventory)/ 1,135,867 1,230,337 1,543,930
Current
Liabilities
Comment: In all the three years the company has not achieved the standard value of 1.1:1
and the value of the Acid Test Ratio is significantly less than that of the standard value in
all three years which shows that the company was in a very bad liquidity position in all the
three years.
Efficiency Ratio:
1. Stock Turnover: Cost of Goods Sold/ Average Stock,

Average Stock = (Opening inventory + Closing Inventory)/2
Details Values 2016-17 Values 2017-18 % Values 2018-19

2016-17 % 2017-18 2018-19 %
Stock (1,691,273) 2.56 (2,095,527)/ 2.79 (1,751,594) 1.82
Turnover / (791,006+ /
(CODS/ (713,771+ 713,771)/2 (1,128,572+
Average 607,810)/ 791,006)/2
Stock) 2
Comment: In 2016 the company sold its average inventory for 2.56 times, in 2017 it sold for
2.78 times and in 2018 it sold its inventory for 1.82 times. Since the company sold its
average inventory highest in 2017 followed by 2016 and then 2018. So the company was
able to manage its selling activities better in 2017 followed by 2016 and then 2018.

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APEX TANNERY LTD.

2. Margin or Gross Profit percentage: (Gross Profit *100)/ Net

Details Values 2016-17 Values 2017-18 Values 2018-19

4. Return on Capital Employed: (Net Profit * 100)/ Capital

Details Values 2016-17 Values 2017-18 Values 2018-19

Details Values 2016-17 Values 2017-18 Values 2018-19

Details Values 2016-17 Values 2017-18 Values 2018-19

2. Acid Test Ratio: (Current Assets – Inventory): Current Liabilities

Details Values 2016-17 Values 2017-18 Values 2018-19

1. Stock Turnover: Cost of Goods Sold/ Average Stock,

Details Values 2016-17 Values 2017-18 % Values 2018-19

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