Financial Table Analysis Of Zara 355q6o

FINANCIAL TABLES ANALYSIS OF ZARA INVESTMENT CO. ZARA INVESTMENT (HOLDING) COMPANY LTD. Dec.31,20 Dec.31,20 Balance Sheet 08 07 CURRENT ASSETS Cash on hands and at banks Trading investment Inventories receivables Other current assets

Long term bonds Deferred tax liabilities Total non-current liabilities

15,451,69 3 3,139,404 3,565,958

4,076,512 202,469,12 9 221,360,43 7

623,488 22,780,53 6 34,219,24 2

15.3%

6,715,654 -5,251,369

-78.2%

72,500 1,740,542 7,171,630 5,009,173

13,500,000 8,379,415 7,995,069

70,703,142 32,417,741

71,868,200 109,787,55 Total liabilities 9 SHAREHOLDERS' EQUITY 125,000,00 Paid in capital 0 Statuory reserve 2,030,948 Voluntary reserve 689,496 Fair value reserve 17,475,879 (-)Accumulated losses 13,522,369

2008

146,501,70 7 28,104,955 23,785,948

2,114,546 7,572,885 5,209,347

1,165,058

Vertical

18,891,308

4,897,463

Due to banks 716,728 Total current liabilities 37,919,359 37,306,866 NON-CURRENT LIABILITIES Long term loans

∆Amount

∆Perce nt

10,535,77 3 215.1% 6.04% -72,500 100.0% 0.00% 374,004 21.5% 0.83% 401,255 5.6% 2.96% 200,174 4.0% 2.04% 11,438,70 6 60.6% 11.87%

15,433,236

Total current assets 30,330,014 NON-CURRENT ASSETS 161,953,40 Property and equipment 0 Projects in progress 31,244,359 Available for sales investment 27,351,906 Advance payment on investment 4,700,000 225,249,66 Total non-current assets 5 255,579,67 Total assets 9 CURRENT LIABILITIES Current portion of long term loans 1,464,285 Current portion of long term bonds 18,000,000 payable 8,365,556 Other current liabilities 10,089,518

Horizontal

18,000,000 1,021,678 51,439,419 88,746,285

2007 2.21% 0.03% 0.79% 3.24% 2.26% 8.53%

10.5% 63.37% 66.18% 11.2% 12.22% 12.70% 15.0% 10.70% 10.75% 1.84%

1.84%

11.3% 88.13% 91.47% 100.00 100.00 15.5% % % 0.57%

3.03%

4,500,000 -13,859 2,094,449

33.3% 7.04% 6.10% -0.2% 3.27% 3.79% 26.2% 3.95% 3.61% -716,728 100.0% 0.00% 0.32% 612,493 1.6% 14.84% 16.85%

38,285,40 1 118.1% 27.66% 14.64% 18,000,00 0 100.0% 0.00% 8.13% 143,380 14.0% 0.46% 0.46% 20,428,78 1 39.7% 28.12% 23.24% 21,041,27 4 23.7% 42.96% 40.09%

125,000,00 0 0 1,026,381 1,004,567 689,496 0 15,313,275 2,162,604 22,362,562 -8,840,193

0.0% 48.91% 56.47% 97.9% 0.79% 0.46% 0.0% 0.27% 0.31% 14.1% 6.84% 6.92% -39.5% 5.29% 10.10%

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Minority interest Net equity Total equity and liabilities

131,673,95 4 14,118,166 145,792,12 0 255,579,67 9

119,666,59 0 12,947,562 132,614,15 2 221,360,43 7

ZARA INVESTMENT (HOLDING) COMPANY LTD. 12 Months Ended Dec.31,20 Dec.31,20 Income Statement 08 07 Operating revenues Operating expenses Gross operating income Less: istrative expenses Losses from financial invest. Add: Other income Profit from operations Less: Net financing expenses Depreciation Provisions and other expenses Miscellaneous fees Profit before income tax Income tax Profit for the year Attribute to: Shareholders Minority interests Earning(Losses) per share attribute to shareholders

CURRENT RATIO QUICK RATIO WORKING CAPITAL RECEIVABLE

12,007,36 4 1,170,604 13,177,96 8 34,219,24 2

9.9% 57.04% 59.91% 100.00 100.00 15.5% % %

Horizontal ∆Amount

77,820,204 58,209,826 19,610,378 48,536,029 36,968,097 11,567,932 29,284,175 21,241,729 8,042,446 3,382,417

10.0% 51.52% 54.06% 9.0% 5.52% 5.85%

Vertical

∆Percen t

2008 2007 100.00 100.00 33.7% % % 31.3% 62.37% 63.51% 37.9% 37.63% 36.49%

2,748,474

633,943

8,603 1,396,667 1,156,182 1,184,796 27,049,317 18,281,384

-1,388,064 -28,614 8,767,933

-99.4% 0.01% 2.40% -2.4% 1.49% 2.04% 48.0% 34.76% 31.41%

535,259 -853,549

11.5% 6.69% 8.02% -11.8% 8.18% 12.41% 24355.2 % 3.17% 0.02% 62.1% 0.51% 0.42% 105.6% 16.21% 10.54% 1405.5% 1.13% 0.10% 93.1% 15.09% 10.44%

5,205,178 6,367,565

4,669,919 7,221,114

2,465,819 393,420 12,617,335 877,833 11,739,502

10,083 2,455,736 242,635 150,785 6,137,633 6,479,702 58,310 819,523 6,079,323 5,660,179

9,844,760 1,894,742 11,739,502

4,669,869 1,409,454 6,079,323

5,174,891 485,288 5,660,179

0.079

0.037

0.042

2008 0.8 0.61 7,589,34 5 10.56

23.1%

4.35%

4.72%

110.8% 12.65% 8.02% 34.4% 2.43% 2.42% 93.1% 15.09% 10.44% 113.5%

0.00%

0.00%

2007 0.51 0.36 18,415,5 58 7.86

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TURNOVER INVENTORY TURNOVER CURRENT ASSET TURNOVER ASSET TURNOVER

25.18 3.16 0.33

19.18 2.37 0.24

GROSS PROFIT MARGIN OPERATING PROFIT MARGIN NET PROFIT MARGIN RETURN ON ASSETS RETURN ON EQUITY

0.38 0.35 0.15 0.05 0.08

0.36 0.31 0.1 0.03 0.04

TOTAL DEBT TO EQUITY TOTAL DEBT RATIO LONG TERM DEBT TO EQUITY FIXED ASSETS TO EQUITY

0.75 0.43 0.49 1.11

0.67 0.4 0.39 1.1

LIQUIDITY RATIOS: 1. Current Ratio =

Current Assets Current Liabilities

•

Current Ratio for 2008 = 30,330,014 = 0.80 37,919,359

•

Current Ratio for 2007 = 18,891,308 = 0.51 37,306,866

→A generally acceptable current ratio is 2 to 1. The rule of thumb says that current ratio should be at least two; that is the current assets should meet current liabilities at least twice. However, Zara’s current ratios for both years are lower than 1. In 2007, the company had only 51 cents worth of current assets for every dollar of liabilities. This grew to 80 cents in 2008 indicating increasing trend on liquidity, however the company is still unable to its short-term debt from its current assets and company have liquid problem. Since their current ratio to low, they may be able to raise it by; - paying some debts. - increasing your current assets from loans or other borrowings with a maturity of more than one year. - converting non-current assets into current assets. - increasing your current assets from new equity contributions. -putting profits back into the business. 2. Quick Ratio = Current assets - Inventories - Other Current Assets Total Current Liabilities 3

•

Quick Ratio for 2008 = 30,330,014 - 2,114,546 - 5,209,347 = 0.61 37,919,359

•

Quick Ratio for 2007 = 18,891,308 – 1,740,542 – 5,009,173 = 0.36 37,306,866

→Quick ratio is one of the best measures of liquidity. By excluding inventories, it concentrates on the really liquid assets with value that is fairly uncertain. It helps to answer the question: “If all sales revenues should disappear, could my business meet its current obligations with the readily convertible ‘quick’ funds on hand?” If the ratio is equal or greater than 1, the company can pay their short-term liabilities. In both years, Zara’s quick ratio is lower than 1 and it means we they can not pay their short-term liabilities, but their quick ratio is getting better from 2007 to 2008. They may increase their current assets or decrease the current liabilities. Zara is a manufacturing company, so that current assets should be greater than current liabilities. 3. Working Capital = Total Current Assets-Total Current Liabilities •

Working Capital for 2008 = 30,330,014 – 37,919359 = -7,589,345

•

Working Capital for 2007 = 18,891,308 – 37,306.866 = -18,415,558

→Working capital measures cash flow more than a ratio. The result of this calculation must be positive. Bankers look at net working capital overtime to determine company’s ability to whether financial crises. Loans are often tied to minimum working capital requirements. Higher is safer but working capital has a low return; if too high, moneys better spent elsewhere. Zara’s working capital is too low but again they are getting better from 2007 to 2008. they must have more working capital. They should increase total current assets or decrease total current liabilities. 4. Receivable Turnover = Net Sales Average Receivable •

Receivable Turnover for 2008 =

77,820,204 = 10.56 (7,572,885+7,171,630)/2

•

Receivable Turnover for 2007 =

58,209,826 = 7.86 (7,572,885+7,171,630)/2

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→It can be used to determine whether the company is having trouble collecting on sales it provided customers on credit and it is used to assess the liquidity of the receivables. It measures the number of times, on average, receivables are collected during the period. Higher receivable turnover ratios are desirable. Indicated customers are paying quickly or paying in cash. Zara’s receivable turnover is good and getting better from 2007 to 2008. 5. Inventory Turnover =

COGS Average Inventory

•

Inventory Turnover for 2008 =

48,536,029 = 25.18 (2,114,546+1,740,542)/2

•

Inventory Turnover for 2007 =

36,968,097 = 19.18 (2,114,546+1,740,542)/2

→This ratio reveals how well inventory is being managed. It is important because the more times inventory can be turned in a given operating cycle, the greater the profit. Because inventories are the least liquid form of asset, a high inventory turnover ratio is generally positive. On the other hand, an unusually high ratio compared to the average for your industry could mean a business is losing sales because of inadequate stock on hand. Again inventory turnover is good and getting better from 2007 to 2008. It means Zara have efficient management of inventory because the more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. 6. Current Asset Turnover = Net Sales Average Current Assets •

Current Asset Turnover for 2008 =

77,820,204 = 3.16 (30,330,014+18,891,308)/2

•

Current Asset Turnover for 2007 =

58,209,826 = 2.37 (30,330,014+18,891,308)/2

→Current asset turnover may be used as a broad measure of asset efficiency. How efficiently a firm is using its current assets to generate revenue. Zara’s current asset turnover is good and getting better from 2007 to 2008. 7. Asset Turnover =

Net Sales 5

Average Assets •

Asset Turnover for 2008 =

77,820,204 = 0.33 (255,579,679+221,360,437)/2

•

Asset Turnover for 2007 =

58,209,826 = 0.24 (255,579,679+221,360,437)/2

→Asset turnover shows the relationship between sales and assets. It is the calculation that speaks volumes about the health of company. One general rule of thumb is that the higher a company’s asset turnover, the lower the profit margin, since the company is able to sell more products at a cheaper rate. Too low assets are useless assets but too high-perhaps not enough assets, may be forgoing opportunities. Their asset turnover is too low, however 2008 is better than 2007. They should try to increase their asset turnover.

PROFITABILITY RATIOS: 8. Gross Profit Margin = Net Sales - COGS Net Sales •

Gross Profit Margin for 2008 = 77,820,204 – 48,536,029 = 0.38 77,820,204

•

Gross Profit Margin for 2007 = 58,209,826 – 36,968,097 = 0.36 58,209,204

→It measures the percentage of sales dollars remaining available to pay the overhead expenses of the company. A high gross profit margin indicates that a business can make a reasonable profit on sales, as long as it keeps overhead costs in control. If your gross profit is low, your net profit will be low. Zara’s gross profit is low, it may indicate that competition has increased or that the company’s products have become less competitive or both. If gross profit margin increases, either they increase their sales or decrease their COGS. So, they should increase their number of sales items instead of increasing sales price. 9. Operating Profit Margin = Operating Income Net Sales •

Operating Profit Margin for 2008 = 27,049,317 = 0.35 77,820,204

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•

Operating Profit Margin for 2007 = 18,281,384 = 0.31 58,209,826

→Zara’s operating profit margin is getting better from 2007 to 2008. 10. Net Profit Margin = Net Income After Taxes Net Sales •

Net Profit Margin for 2008 = 11,739,502 = 0.15 77,820,204

•

Net Profit Margin for 2007 = 6,079,323 = 0.10 58,209,826

→Net profit margin is used for measuring performance and is comparable across companies in similar industries. Net profit margin is getting better from 2007 to 2008. 11. Return on Asset = Net Income(Profit) Average Assets •

Return on Asset for 2008 =

11,739,502 = 0.05 (255,579,679+221,360,437)/2

•

Return on Asset for 2007 =

6,079,323 = 0.03 (255,579,679+221,360,437)/2

→High return for assets means that company use their assets well. Zara’s return on asset is very low. They have a liquidity problem and it causes troubles on profitability and solvency. However, total asset is growing from 2007 to 2008. 12. Return on Equity = Net Income(Profit) Average Equity •

Return on Equity for 2008 =

11,739,502 = 0.08 (145,792,120+132,614,152)/2

•

Return on Equity for 2007 =

6,079,323 = 0.04 (145,792,120+132,614,152)/2

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→High return on equity means happy shareholders/owners. Zara’s return on equity is very low. They need to find new shareholders but it is really hard.

SOLVENCY RATIOS: 13. Total Debt to Equity =

Total Debt Shareholders’ Equity

•

Total Debt to Equity for 2008 = 109,787,559 = 0.75 145,792,120

•

Total Debt to Equity for 2007 = 88,746,285 = 0.67 132,614,152

→A high debt to equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity) the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earning by a greater amount, then the debt cost then the shareholders’ benefit as more earnings are being spread among the same amount of shareholders. This can lead bankruptcy which would leave shareholders with nothing. 14. Total Debt Ratio = Total Debt Total Assets •

Total Debt Ratio for 2008 = 109,787,559 = 0.43 255,579,679

•

Total Debt Ratio for 2007 = 88,746,285 = 0.40 221,360,437

→ Lower is safer. Too high means highly leveraged (either too much debt or too small equity base) Also too low means inefficient use of equity. Their total debt to equity is low and again there is an increase from 2007 to 2008. 15. Long Term Debt to Equity = Long Term Debt Shareholders’ Equity

8

•

Long Term Debt to Equity for 2008 = 71,838,200 = 0.49 145,792,120

•

Long Term Debt to Equity for 2007 = 51,439,419 = 0.39 132,614,152

→ The long-term debt to equity ratio can tell you how much debt a company is using to finance its operations. If this number is too high it may signify future liquidity problems. If this number is too low it can signify inefficient use of the financing alternatives available to a company. Long term debt to equity is increasing from 2007 to 2008. 16. Fixed Assets to Equity = Fixed Assets Shareholders’ Equity •

Fixed Assets to Equity for 2008 = 161,953,400 = 1.11 145,792,120

•

Fixed Assets to Equity for 2007 = 146,501,707 = 1.10 132,614,152

→Fixed assets to equity indicates the company’s ability to satisfy long term debt. A ratio is greater than 1 means that some of the fixed assets are financed by debt. Zara’s fixed asset to equity ratio is greater than 1, so that they finance their debts with fixed assets.

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