LIQUIDITY RATIOS

RATIO Current ratio Quick ratio Cash ratio Working capital over assets Working capital over S.T.L 31/07/2008 0.98 0.56 0.42 -0.00068 -0.02 31/01/2008 1.21 0.78 0.60 0.07 0.21 31/07/2007 1.14 0.67 0.48 0.46 0.14 IDEAL VALUE 1.5 - 2 1 0.3 0.5 - 1

Current ratio: The firm has liquidity problems, especially in the last period. In the first two periods current assets are actually sufficient to pay all current liabilities (a value greater that 1), but there is little margin left for hypothetical late-paying debtors. Quick ratio or acid test: The firm is in risk of defaulting because it does not have sufficient liquid assets available to meet its current liabilities. The situation worsens throughout periods. Cash ratio: Mismanagement of cash. Besides not having enough liquid assets, they are improperly distributed. Nevertheless, this value is not as alarming as the lack of liquidity that the firm is facing. Working capital: The working capital is also too low and worsens throughout the periods. Its value in the last period its actually alarming. If the working capital is negative the firm will default on its payments.

GEARING RATIOS
RATIO Gearing ratio Self-financing ratio Distance from insolvency Quality of debt Permanent financing Interests over sales Repayment capacity 31/07/2008 0.46 1.17 2.16 0.88 0.54 0.0015 4.60 31/01/2008 0.41 1.45 2.46 0.85 0.59 0.0007 4.24 31/07/2007 0.40 1.52 2.52 0.83 0.60 0.002 7.50 IDEAL VALUE 0.4 0.6 0.7 1.5 >1 Low High <0.4 High

The overall debt of the firm is correct. The only outstanding value that we find is a too high self finance in year 2007 but it is corrected in subsequent periods. It can also be seen that the majority of the ratios worsen throughout the periods but they still not reach alarming values.

MANAGEMENT OF ASSETS RATIOS

RATIO Fixed asset turnover Current asset turnover Stock turnover 31/07/2008 2.11 3.20 4.04 31/01/2008 2.29 3.16 4.71 31/07/2007 2.28 3.82 5.05

The assets that generate more sales are the stocks.

DEBTORS AND CREDITORS TURNOVER PERIODS

RATIO Debtor collection period Creditor collection period 31/07/2008 18.84 31/01/2008 20.81 31/07/2007 18.78 IDEAL VALUE High

265.81

204.68

190.96

Low

The firm takes few days to collect receivables but it takes a long time to pay its creditors. This may be due to the lack of liquidity.

RATIOS USEFUL IN ANALYSING THE PROBABILITY OF FAILURE OR SUCCESS IN A COMPANY

RATIO
urrent ssets urrent ia ilities quity otal ssets et rofit ssets et rofit ales et rofit quity

31/07/2008 0.98 0.54 0.06 0.09 0.10

31/01/2008 1.21 0.60 0.18 0.13 0.30

31/07/2007 1.14 0.60 0.17 0.12 0.30

IDEAL VALUE >1.47 >0.40 >0.03 >0.02 >0.06

Only one of these ratios representatives of the probability of success or failure in a firm corresponds with a failure. The interpretation of that is that the firm is actually successful despite the inability to pay its short term liabilities with its current assets.

MULTI-DIMENSIONAL APPROACH: THE ALTMANS Z-INDEX

The Spanish ltmans Z-index: Z = - 4.2 + 1.35
urrent assets

+ 6.5

quity ia ilities

+7

et rofit ssets

+5

et rofit quity

At 31/07/2008: Z = - 4.2 + 1.35(1.14) + 6.5(1.53) + 7(0.18) + 5(0.30) = 10 At 31/01/2008: Z = - 4.2 + 1.35(1.21) + 6.5(1.46) + 7(0.17) + 5(0.30) = 9.61 At 31/07/2008: Z = - 4.2 + 1.35(0.98) + 6.5(1.16) + 7(0.06) + 5(0.10) = 5.29 As all three values are greater than 0, there is a little probability for the firm to go bankruptcy. Note though that values are decreasing. Hence, the firm is each period a little less healthy.