Case Studies of Financial Tools and Policy - Myassignmenthelp.Com

Question: Discuss a Case Studies of Financial Tools and Policy. Answer: Company Overview: Agathia Group PJSC is considered as one of the leading organization of Abu Dhabi which is the leading food and beverage firm (Agthia.com, 2018). The firm is listed in ADX and consists excellent commercial portfolio. Agathia Group PJSC provides high quality trusted goods to its consumers in UAE. Profitability Ratios: The profitability ratio helps in ascertaining the efficiency of the firm (Bodie et al., 2015). The gross margin for Agathia Group during the year 2012 stood 25% while the net profit margin stood 9.40. subsequently the operating profit margin in the year 2012 stood 9.08% with return on debt and return on equity standing 40% and 11% respectively for the year ended 2012. On observing the profitability ratios trend Agathia Group has posted a profitable performance with the better ability of providing return to shareholders. Profitability Ratios 2012 Gross Margin Ratio 25% Net Profit Ratios 9.40% Operating Profit Ratio 9.08% Return on Debt 40% Return on Equity 11% Figure 1: Figure representing Profitability Ratio (Source: As Created by Author) Liquidity Ratios: The liquidity ratios serve the medium of determining the firms ability in paying off its current liabilities as and when they are become accrued and the liabilities of long term when they become payable (Asquith Weiss, 2016). The current ratio forms the most basic liquidity test which signifies the organizations ability in discharging its short-term liabilities through its short term assets. During the year 2012 the current ratio reported by the firm stood 2.42 for the year 2012 and the quick ratio for the same period stood 1.50. Subsequently the cash ratio for the firm stood 1.08 and this serves that the company has sufficiently managed its cash reserves to pay off its debts. Overall, the current assets have been sufficient in meeting the organizations obligations. Liquidity Ratios 2012 Current Ratio 2.42 Quick Ratio 1.50 Cash Ratio 1.08 Figure 2: Figure representing Liquidity Ratio (Source: As Created by Author) Leverage Ratio: The leverage serves as the important tool in measuring the leverage of the organization along with the organizations extent of measuring the risk associated with the business (Jordan, 2014). As evident under the leverage ratio the debt ratio is computed and for the year 2012 the Debt Ratio reported by the firm stood 2.93. The debt ratio reported stood higher and it can be asserted that the with higher debt ratio the company is believed to be taking higher risk in financing its debt obligations. The equity ratio and the Debt-Equity ratio for Agathia Group stood 0.66 and 0.52 respectively for the year ended 2012. The debt-equity ratio for Agathia represented that the relative proportion of shareholders equity is higher than debt that is used to finance to organization assets. The times interest earned for the firm stood 13.13 for the year 2012 and it can be stated that interest coverage period of Agathia has been sufficient in honouring its debts. Leverage Ratios 2012 Debt Ratio 2.93 Equity Ratio 0.66 Debt Equity Ratio 0.52 Times Interest Earned 13.13 Figure 3: Figure representing Leverage Ratio (Source: As Created by Author) Turnover ratio: Under the turnover ratio the accounts receivable turnover ratio and the fixed asset turnover ratio for the firm during 2012 stood 7.82 and 2.09. The sales to inventory turnover reported by the firm stood 4.99 with working capital ratio standing 2.31. The accounts receivable ratio reported by the firm for 2012 was 5.45. Conclusively the turnover ratios represent that Agathia Groups efficiency in deploying its assets in deriving revenue has been effective with average inventory in proportion to sales is managed effectively by the firm (Deegan, 2016). Turnover Ratios 2012 Accounts Receivable Turnover 7.82 Fixed Asset Turnover Ratio 2.09 Sales to inventory turnover 4.99 Sales to net working capital turnover 2.31 Accounts payable to sales turnover 5.45 Figure 4: Figure representing Turnover Ratio (Source: As Created by Author) Reference: Agthia Home. (2018).Agthia.com. Retrieved 11 January 2018, from https://agthia.com/en-us/ Agthia Investors Results Presentations Results Call Materials. (2018).Agthia.com. Retrieved 11 January 2018, from https://agthia.com/en-us/Investors/Results-Presentations/Results-Call-Materials Asquith, P., Weiss, L. A. (2016). Determining a Firm's Financial Health (PIPES?A).Lessons in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies, and Valuation, 7-25. Bodie, Z., Kane, A., Marcus, A. J. (2014).Investments, 10e. McGraw-Hill Education. Deegan, C. (2016).Financial accounting. McGraw-Hill Education Australia. Jordan, B. (2014).Fundamentals of investments. McGraw-Hill Higher Education.