THE BARON TRAVEL CORPORATION

Financial Ratios Net Profit Margin Formula Net Profit Net Sales 2010 1,949,668 45,790,871 = 0.04 Answer 2009 775,495 43,038,949 = 0.02 Significance/Interpretation 2008 678,936 41,579,707 = 0.02 Net profit margin indicates how well the company converts sales into profits after all expenses is subtracted out. It generates PhP 0.02 and PhP 0.04 for 2008 and 2009, and 2010 respectively, for every sale. Indicates the relationship between net sales revenue and the cost of goods sold. This ratio should be compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs. It would retain PhP 0.34 (2008) PhP 0.27 (2009), and PhP 0.30 (2010) from each peso of revenue generated, to be put towards paying off selling, general and administrative expenses, interest expenses and distributions to shareholders. Measures of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Having Php 0.07 for 2008 and 2009, and PhP 0.10 for shows that the company can make PhP 0.07 and PhP 0.10 for every sales in 2008 and 2009, and 2010 respectively..

Gross Profit Margin

Gross Profit Net Sales

13,897,299 45,790,871 = 0.30

11,751,895 43,038,949 = 0.27

14,171,876 41,579,707 = 0.34

Operating Profit Margin

Operating Profit Net Sales

4,653,847 45,790,871 = 0.10

2,823,955 43,038,949 = 0.07

2,846,764 41,579,707 = 0.07

THE BARON TRAVEL CORPORATION

Cash Flow Margin Cash Flow Net Sales 13,375,996 45,790,871 = 0.29 1,949,668 64,440,066 = 0.030 1,949,668 11,160,234 = 17.47 % 10,847,242 43,038,949 = 0.25 775,495 61,945,789 = 0.013 775,495 9,210,566 = 8.42 % 9,982,545 41,579,707 = 0.24 678,936 74,481,044 = 0.009 678,936 8,435,071 = 8.05 % Measures rate of return on resources provided by owners. A higher return on equity means that surplus funds can be invested to improve business operations without the owners of the business (stockholders) having to invest more capital. It also means that there is less need to borrow. There is a low return on equity during 2008, 2009, and 2010, 8.05%, 8.42%, and 17.47% respectively. A ratio that indicates what proportion of debt a company has relative to its assets. A debt ratio of less than 1 indicates that a company has more assets than debt like for 2008, 2009, and 2010; there is 0.89, 0.85, and 0.83 respectively. Measures the proportion of the total assets that are financed by stockholders, and not creditors. Measures the ability of the firm to translate sales to cash. The higher the percentage, the more cash available from sales. Measures overall efficiency of the firm in managing assets and generating profits.

Rate of return on assets

Net Profit Ave. Total Assets

Rate of return on equity

Net Income Ave. Shareholders Equity

Debt Ratio (Debt to asset ratio)

Total Liabilities Total Assets

53,279,832 64,440,066 = 0.83

52,735,223 61,945,789 = 0.85

66,045,973 74,481,044 = 0.89

Equity Ratio

Total Equity Total Assets

11,160,234 64,440,066 = 0.17

9,210,566 61,945,789 = 0.15

8,435,071 74,481,044 = 0.11

THE BARON TRAVEL CORPORATION

Debt to Equity Ratio Total Liabilities Total Equity 53,279,832 11,160,234 = 4.77 Fixed Assets to Long Term Liabilities Fixed Assets Total Long Term Liabilities 3,965,832 2,482,325 = 1.60 3,965,832 11,160,234 = 0.36 4,653,847 1,876,309 = 2.48 60,474,234 50,797,507 = 1.19 9,676,727 64,440,066 = 0.150 Current Assets Current 60,474,23450,797,507 52,735,223 9,210,566 = 5.73 3,539,792 29,338 = 120.66 3,539,792 9,210,566 = 0.38 2,823,955 1,721,394 = 1.64 58,405,997 52,705,885 = 1.11 5,700,112 61,945,789 = 0.092 58,405,99752,705,885 66,045,973 8,435,071 = 7.83 4,219,720 76,557 = 55.12 4,219,720 8,435,071 = 0.50 2,846,764 1,828,329 = 1.56 70,261,324 65,969,416 = 1.07 4,291,908 74,481,044 = 0.058 70,261,32465,969,416 Indicates what proportion of the firm's capital is derived from debt compared to other sources of capital such as common stock, preferred stock and retained earnings. The fixed assets to long term debt ratio can indicate dangerous financial policies due to business vulnerability in a tight money market. It divides a company's fixed assets by its owners' equity. In this instance, fixed assets refer to a firm's plant, property and equipment, the lifetime of which is three or more years. A measure of a company's ability to pay its fixed expenses, such as rent and interest, on debt without resorting to more debt.

Fixed Assets to Total Equity

Fixed Assets Total Equity

Times fixed charges earned

Net Income before Taxes and Fixes Charges Fixed Charges Total Current Assets Total Current Liabilities Working Capital Total Assets

Current Ratio

The rule of thumbs is 2:1. The business has 1.19, 1.11, and 1.07 (2010, 2009, and 2008 respectively) of current assets to pay for a peso of current liabilities. Measures a company's ability to cover its short term financial obligations (Total Current Liabilities) by comparing its Total Current Assets to its Total Assets. A measure of both a company's efficiency and its short-term financial health. The company has a positive working

Working Capital to Total Assets

Working Capital

THE BARON TRAVEL CORPORATION

Liabilities = 9,676,727 = 5,700,112 = 4,291,908 capital which indicates that the firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. To measure the efficiency with which the working capital is being used by a firm.

Working Capital turnover

Net Sales Ave. Working Capital

45,790,871 9,676,727 = 4.73 45,790,871 64,440,066 = 71 times

43,038,949 5,700,112 = 7.55 43,038,949 61,945,789 = 69 times

41,579,707 4,291,908 = 9.69 41,579,707 74,481,044 = 56 times

Assets Turnover

Net Sales Ave. Total Assets

It measures a firm's efficiency at using its assets in generating sales or revenue the higher the number the better. The companys assets were used 71, 69, and 56 times to generate revenue during 2010, 2009, and 2008 respectively. Low sales to fixed assets ratio means inefficient utilization or obsolescence of fixed assets, which may be caused by excess capacity or interruptions in the supply of raw materials. Measures the ability of a company to effectively use its assets. This means that the company has to make a significant investment in assets relative to the amount of sales revenue those assets can produce.

Sales to fixed assets

Net Sales Ave. Fixed Assets

45,790,871 3,965,832 = 11.55 45,790,871 64,440,066 = 0.71

43,038,949 3,539,792 = 12.16 43,038,949 61,945,789 = 0.69

41,579,707 4,219,720 = 9.85 41,579,707 74,481,044 = 0.56

Capital Intensity Ratio

Total Assets Net Sales