ratio anaylsis of nokia .. adeel ahmad wahla

NATIONAL COLLEGE OF BUSINESS ADMINISTRATION & ECONOMICS 24/02/2016

Project

Financial Management

Topic:

Ratio Analysis

Submitted To:

Shehraz Bajwa

Submitted By:

Adeel Ahmad

Roll#. Mcm14011

M.Com 3rd Semester

Departement Of Commerce

National College Of Business Administration & Economics

Dedication

I dedicating my valuable project to our parents, Prof’s, friends and to the whole

class.

Acknowledgement

I thank to our Allah AL-Mighty and off course thankful to our honorable teacher

who has always been guiding us in a good way through understanding this course as

well as the whole project. He has given us an opportunity to show abilities in the

subject. I also like to thank our class mates because of their friendly attitude and

maintaining lovely environment in the class.

PERIOD ENDING Dec 31, 2015 Dec 31, 2014 Dec 31, 2013

Total Revenue 58,802,000 71,485,887 75,203,328

Cost of Revenue 39,772,000 46,995,169 49,716,267

Gross Profit 19,031,000 24,490,718 25,487,062

Operating Expenses

Research Development 8,478,000 8,413,090 8,317,466

Selling General and

Administrative

7,533,000 9,077,058 5,408,489

Non Recurring 1,303,000 - -

Others - - -

Total Operating Expenses - - -

Operating Income or Loss 1,717,000 7,000,570 11,761,107

Income from Continuing Operations

Total Other Income/Expenses

(337,000) 266,433 480,165

Earnings Before Interest And

1,380,000 7,267,004 12,241,272

Interest Expense - 260,795 63,335

Income Before Tax 1,380,000 7,006,209 12,177,937

Income Tax Expense 1,007,000 1,523,886 2,241,754

Minority Interest - 139,560 676,061

Net Income From Continuing

373,000 5,621,884 10,612,245

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 373,000 5,621,884 10,612,245

Preferred Stock And Other

Adjustments

Net Income Applicable To

Common Shares

$373,000 $5,621,884 $10,612,245

PERIOD ENDING Dec 31, 2015 Dec 31, 2014 Dec 31, 2013

Assets

Current Assets

Cash And Cash Equivalents 1,639,000 2,404,948 3,129,913

Short Term Investments 11,092,000 7,209,206 14,181,081

Net Receivables 11,471,000 13,455,587 16,726,252

Inventory 2,676,000 3,570,770 4,236,060

Other Current Assets 7,002,000 7,854,848 4,873,826

Total Current Assets 33,879,000 34,495,359 43,147,133

Long Term Investments 960,000 895,160 995,680

Property Plant and Equipment 2,679,000 2,946,273 2,816,185

Goodwill 7,419,000 8,820,493 2,038,494

Intangible Assets 3,963,000 5,860,123 4,029,854

Accumulated Amortization - - -

Other Assets 214,000 14,097 64,808

Deferred Long Term Asset Charges 2,162,000 2,767,241 2,287,414

Total Assets 51,276,000 55,798,745 55,379,567

Liabilities

Current Liabilities

Accounts Payable 16,434,000 17,266,006 20,897,505

Short/Current Long Term Debt 1,106,000 5,062,233 1,577,476

Other Current Liabilities 4,251,000 6,366,205 5,474,769

Total Current Liabilities 21,791,000 28,694,444 27,949,750

Long Term Debt - - -

Other Liabilities 6,454,000 1,311,021 474,274

Deferred Long Term Liability Charges 1,869,000 2,519,134 1,418,403

Minority Interest 2,383,000 3,245,129 3,777,989

Negative Goodwill - - -

Total Liabilities 30,114,000 35,769,728 33,620,415

Stockholders' Equity

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 353,000 346,786 362,333

Retained Earnings 14,537,000 16,482,212 20,429,123

Treasury Stock (977,000) (2,651,646) (4,633,743)

Capital Surplus 400,000 623,087 948,548

Other Stockholder Equity 4,465,000 5,228,577 4,652,891

Total Stockholder Equity 18,778,000 20,029,018 21,759,152

Net Tangible Assets $7,396,000 $5,348,402 $15,690,804

Ratio Analysis

Liquidity Ratio:

2013 2014 2015

Current Ratio:

Current Ratio

=CurrentAssets

Current Liability

Current Ratio

=$𝟒𝟑, 𝟏𝟒𝟕, 𝟏𝟑𝟑

$𝟐𝟕, 𝟗𝟒𝟗, 𝟕𝟓𝟎

Current Ratio:

Current Ratio

=CurrentAssets

Current Liability

Current Ratio

=$𝟑𝟒, 𝟒𝟗𝟓, 𝟑𝟓𝟗

$𝟐𝟖, 𝟔𝟗𝟒, 𝟒𝟒𝟒

Current Ratio:

Current Ratio

=CurrentAssets

Current Liability

Current Ratio

=$𝟑𝟑, 𝟖𝟕𝟗, 𝟎𝟎𝟎

$𝟐𝟏, 𝟕𝟗𝟏, 𝟎𝟎𝟎

𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟓𝟖%

𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟐𝟎%

𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟓𝟓%

Interpretation:

Current ratio measures whether or not a company has enough resources to pay its debt over the

next business cycle.

In 2015 current ratio is comparatively less than the previous year.

In 2015 current assets not exceed Current liabilities.

This shows that the company is capable to pay its obligations.

Quick Ratio:

2014 2015 2015

Quick Ratio:

Quick Ratio

=CurrentAssets − Inventory

Current Liability

Quick Ratio

=$𝟒𝟑, 𝟏𝟒𝟕, 𝟏𝟑𝟑 − $4,236,060

$𝟐𝟕,𝟗𝟒𝟗, 𝟕𝟓𝟎

Quick Ratio:

Quick Ratio

Current Liability

Quick Ratio

=$𝟑𝟒, 𝟒𝟗𝟓, 𝟑𝟓𝟗 − $3,570,770

$𝟐𝟖,𝟔𝟗𝟒, 𝟒𝟒𝟒

Quick Ratio:

Quick Ratio

Current Liability

Quick Ratio

=$𝟑𝟑, 𝟖𝟕𝟗, 𝟎𝟎𝟎 − $2,676,000

$𝟐𝟏, 𝟕𝟗𝟏,𝟎𝟎𝟎

𝐐𝐮𝐢𝐜𝐤 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟑𝟗%

𝐐𝐮𝐢𝐜𝐤 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟎𝟕%

𝐐𝐮𝐢𝐜𝐤 𝐑𝐚𝐭𝐢𝐨 = 𝟏. 𝟒𝟑%

Interpretation:

Quick Ratio is also known as the "acid test" ratio; it is a refinement of the current ratio and is a

more conservative measure of liquidity.

The ratio expresses the degree to which a company's current liabilities are covered by the most

liquid current assets.

There is a slightly increase in the quick ratio as compare to previous year.

This indicates that the company relies too much on inventory or other assets to pay its short-term

liabilities.

Profitability Ratio:

2013 2014 2015

Gross Profit Margin:

Gross Profit Margin

=Gross Profit

Net Sale× 100

Gross Profit Margin

=$𝟐𝟓, 𝟒𝟖𝟕, 𝟎𝟔𝟐

$𝟕𝟓, 𝟐𝟗𝟑, 𝟑𝟐𝟖

× 100

Gross Profit Margin

=Gross Profit

Net Sale× 100

Gross Profit Margin

=$𝟐𝟒, 𝟒𝟗𝟎, 𝟕𝟏𝟖

$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕

× 100

Gross Profit Margin

=Gross Profit

Net Sale× 100

Gross Profit Margin

=$𝟏𝟗, 𝟎𝟑𝟏, 𝟎𝟎𝟎

$𝟓𝟖, 𝟖𝟎𝟐, 𝟎𝟎𝟎

× 100

𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭 𝐌𝐚𝐫𝐠𝐢𝐧

= 𝟑𝟑. 𝟖𝟗%

= 𝟑𝟒. 𝟐𝟓%

= 𝟑𝟐. 𝟑𝟔%

Interpretation:

Gross profit margin measures company's manufacturing and distribution efficiency during the

production process.

Gross profit decrease in 2015 as compare to 2014 or 2013.

Which is not better than previous year.

Operating Profit Margin:

2013 2014 2015

Operating Profit

Margin:

Operating Profit Margin

=Operating Profit

Net Sale× 100

=$𝟏𝟏, 𝟕𝟔𝟏,𝟏𝟎𝟕

$ 𝟕𝟓, 𝟐𝟎𝟑,𝟑𝟐𝟖

× 100

Operating Profit

Margin:

=Operating Profit

Net Sale× 100

=$𝟕, 𝟎𝟎𝟎,𝟓𝟕𝟎

$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕

× 100

Operating Profit

Margin:

=Operating Profit

Net Sale× 100

=$𝟏, 𝟕𝟏𝟕,𝟎𝟎𝟎

$𝟓𝟖, 𝟖𝟎𝟐,𝟎𝟎𝟎× 100

𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐏𝐫𝐨𝐟𝐢𝐭 𝐌𝐚𝐫𝐠𝐢𝐧

= 𝟏𝟓. 𝟔𝟑%

= 𝟗. 𝟕𝟗%

= 𝟐. 𝟗𝟏%

Interpretation:

Operating profit margin is used to measure company's pricing strategy and operating efficiency.

In operating profit margin there is a great change as compare to previous year.

Operating profit decreases. It shows that the company is earning less as compare to previous

years.

Net Profit Margin:

2013 2014 2015

Net Profit Margin:

Net Profit Margin

=Net Profit After Tax

Net Sale× 100

Net Profit Margin

=$10,612,245

$𝟕𝟓, 𝟐𝟎𝟑,𝟑𝟐𝟖× 100

Net Profit Margin:

Net Profit Margin

Net Sale× 100

Net Profit Margin

=$5,621,884

$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕× 100

Net Profit Margin:

Net Profit Margin

Net Sale× 100

Net Profit Margin

=$373,000

$𝟓𝟖,𝟖𝟎𝟐,𝟎𝟎𝟎× 100

𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 𝐌𝐚𝐫𝐠𝐢𝐧

= 𝟏𝟒. 𝟏𝟏%

= 𝟕. 𝟖𝟔%

= 𝟎. 𝟔𝟑%

Interpretation:

Net profit margin measures how much of each dollar earned by the company is translated into

profits.

Net profit margin provides clues to the company's pricing policies, cost structure and production

efficiency.

There is huge decrease in the net profit margin than previous year. It shows that company in bad

condition.

Return on Total Assets:

2013 2014 2015

Return on Total Assets

Total Assets× 100

=$10,612,245

$𝟓𝟓,𝟑𝟕𝟗,𝟓𝟔𝟕

× 100

Total Assets× 100

=$5,621,884

$𝟓𝟓,𝟕𝟗𝟖,𝟕𝟒𝟓

× 100

Return on Total

Assets:

Total Assets× 100

=$373,000

$𝟓𝟏,𝟐𝟕𝟔,𝟎𝟎𝟎 × 100

𝐑𝐞𝐭𝐮𝐫𝐧 𝐨𝐧 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬

= 𝟏𝟗. 𝟏𝟔%

= 𝟏𝟎. 𝟎𝟕%

= 𝟎. 𝟕𝟐%

Interpretation:

Return on Assets shows how many dollars of earnings result from each dollar of assets the

company controls.

Return on total assets decrease from 19.16% to 10.07% to 0.72% and this is big change which

indicate that company is not doing well.

Return on Total Equity:

2013 2014 2015

Return on Total

Equity:

Return on Total Equity

Total Equity× 100

=$ 10,612,245

$𝟐𝟏,𝟕𝟓𝟗,𝟏𝟓𝟐× 100

Return on Total

Equity:

Total Equity× 100

=$5,621,884

$𝟐𝟎,𝟎𝟐𝟗,𝟎𝟏𝟖

× 100

Return on Total

Equity:

Total Equity× 100

=$373,000

$𝟏𝟖,𝟕𝟕𝟖,𝟎𝟎𝟎× 100

𝐑𝐞𝐭𝐮𝐫𝐧 𝐨𝐧 𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲

= 𝟒. 𝟖𝟕%

= 𝟐𝟖. 𝟎𝟔%

= 𝟏. 𝟗𝟖%

Interpretation:

Return on Equity is also referred as Stockholder's return on investment, it tells the rate that

shareholders are earning on their shares.

Nokia is earning 1.98% on shareholder's equity as compare to the previous year.

It indicates the weakness of company.

Debt Ratio:

2013 2014 2015

Time Interest Earned

Ratio:

Time Interest Earned Ratio

Interest

=$12,177,937

$567543

Ratio:

Interest

=$7,267,004

$400355

Ratio:

Time Interest Earned Ratio =EBIT

Interest

=1,380,000

𝐓𝐢𝐦𝐞 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐄𝐚𝐫𝐧𝐞𝐝 𝐑𝐚𝐭𝐢𝐨

= 𝟏𝟓.𝟔𝟎 𝐓𝐢𝐦𝐞𝐬

𝐓𝐢𝐦𝐞 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐄𝐚𝐫𝐧𝐞𝐝 𝐑𝐚𝐭𝐢𝐨

= 𝟏𝟖.𝟏𝟓 𝐓𝐢𝐦𝐞𝐬

𝐍𝐎𝐓𝐄. 𝐍𝐨𝐭 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐚𝐯𝐢𝐥𝐚𝐛𝐥𝐞 𝐢𝐧 𝟐𝟎𝟎𝟗

Interpretation:

Time interest earned ratio also known as interest coverage ratio.

Times Interest Earned is a great tool to measure a company's ability to meet its debt obligations.

In 2015 there is increase from 0.30 to 3.24%.

It shows that the company is able to meet its interest obligations because earnings are

significantly greater than annual interest obligations.

Debt Ratio:

2013 2014 2015

Debt Ratio:

Debt Ratio =Total Debt

Total Assets× 100

Debt Ratio =$1,577,476

$𝟓𝟓,𝟑𝟕𝟗,𝟓𝟔𝟕

× 100

Debt Ratio:

Total Assets× 100

$𝟓𝟓,𝟕𝟗𝟖,𝟕𝟒𝟓

× 100

Debt Ratio:

Total Assets× 100

𝟓𝟏,𝟐𝟕𝟔,𝟎𝟎𝟎

× 100

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟐. 𝟖𝟒%

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟗. 𝟎𝟕%

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟐. 𝟏𝟓%

Interpretation:

This ratio expresses the relationship between capital contributed by creditors and that contributed

by owners.

It expresses the degree of protection provided by the owners for the creditors.

The debt ratio in 2015 seems to be slightly decreased as compare to previous year and this is not

good sign for Nokia Company.

This ratio indicates that company increases their debt.

Debt to Equity Ratio:

2013 2014 2015

Debt to Equity Ratio

=Long Term Debt

Total Equity

=$1,577,476

$𝟐𝟏, 𝟕𝟓𝟗,𝟏𝟓𝟐

=Long Term Debt

Total Equity

=$5,062,233

$𝟐𝟎, 𝟎𝟐𝟗,𝟎𝟏𝟖

=Long Term Debt

Total Equity

=$1,106,000

$𝟏𝟖, 𝟕𝟕𝟖,𝟎𝟎𝟎

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟎. 𝟎𝟕%

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟎. 𝟐𝟓%

𝐃𝐞𝐛𝐭 𝐑𝐚𝐭𝐢𝐨 = 𝟎. 𝟎𝟓%

Interpretation:

Debt to equity ratio seems to be decrease as compare to previous years. This indicates that

company has no financed its growth mostly via debt.

Activity Ratio:

2013 2014 2015

Average Age of

Inventory:

Average Age of Inventory

=No. of Days In Year

Inventory Turnover

Inventory Turn Over Ratio

=Cost of Goods Sold

Average Inventory

Average Inventory = $2,676,000

=$𝟕𝟓, 𝟐𝟎𝟑,𝟑𝟐𝟖

$2,676,000

= 28.10

Average Age of Inventory =365

Average Age of

Inventory:

Inventory Turnover

=Cost of Goods Sold

Average Inventory

Average Inventory = $2,676,000

=$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕

$2,676,000

= 26.71

Average Age of

Inventory:

Inventory Turnover

=Cost of Goods Sold

Average Inventory

= $2,676,000

=$𝟓𝟖, 𝟖𝟎𝟐,𝟎𝟎𝟎

$2,676,000

Inventory Turn Over Ratio = 21

𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐀𝐠𝐞 𝐨𝐟 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲

= 𝟏𝟐. 𝟗𝟖 𝐝𝐚𝐲𝐬

= 𝟏𝟑. 𝟔𝟔𝐝𝐚𝐲𝐬

= 𝟏𝟕. 𝟑 𝐝𝐚𝐲𝐬

Interpretation:

Average age of inventory is the average number of days it takes for a company to sell a product.

In 2015 average age of inventory increase.

It shows that firm is not properly managing its inventory and it also the strength of company.

Average Collection Period:

2013 2014 2015

Average Collection

Period:

Average Collection Period

=No. of days in year

A/R turnover ratio

A/R Turnover ratio

=Net Sale

Accounts Receivable

A\R turnover ratio

=$𝟕𝟓, 𝟐𝟎𝟑,𝟑𝟐𝟖

$16,726,252

Account Receivable turnover ratio

= 4.49

Average Collection Period =365

Average Collection

Period:

A/R turnover ratio

A/R Turnover ratio

=Net Sale

Accounts Receivable

A\R turnover ratio

=$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕

$13,455,587

= 5.31

Average Collection

Period:

A/R turnover ratio

A/R Turnover ratio

=Net Sale

Accounts Receivable

𝐴\𝑅 turnover ratio

=$𝟓𝟖, 𝟖𝟎𝟐,𝟎𝟎𝟎

$11,471,000

= 5.13

𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐏𝐞𝐫𝐢𝐨𝐝= 𝟖𝟏.𝟐𝟗 𝐃𝐚𝐲𝐬

𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐏𝐞𝐫𝐢𝐨𝐝

= 𝟔𝟖.𝟕𝟑𝐃𝐚𝐲𝐬

𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐏𝐞𝐫𝐢𝐨𝐝

= 𝟕𝟏.𝟏𝟓 𝐃𝐚𝐲𝐬

Interpretation:

The average collection period ratio represents the average number of days for which a firm has to

wait before its receivables are converted into cash.

Average collection period is no good because previously we receive collection in 81.2, 68.73

days and in current year we are receiving collection in 71.15 days. It is also the weakness of

company.

Average Payment Period:

2013 2014 2015

Average Payment Period

A/P turnover ratio

A/P Turnover ratio

=Net Sale

Accounts Payable

Account Payable turnover ratio

=$𝟕𝟓, 𝟐𝟎𝟑,𝟑𝟐𝟖

$17,266,006

= 4.35

A/P turnover ratio

A/P Turnover ratio

=Net Sale

Accounts Payable

=$𝟕𝟏, 𝟒𝟖𝟓,𝟖𝟖𝟕

$17,266,006

= 4.14

A/P turnover ratio

A/P Turnover ratio

=Net Sale

Accounts Payable

=$𝟓𝟖, 𝟖𝟎𝟐,𝟎𝟎𝟎

$16,434,000

= 3.57

Interpretation:

Average payment period ratio represents the average number of days taken by the firm to pay its

creditors.

Average payment period is very good because previously we are paying collection in 83.90days

88.14days but in current year we are paying collection in 102.24 days.

It shows that management of company is quite good.

Conclusion

I have calculated the ratio of Nokia from this i understands the strength and weakness of

company. The main purpose of this project is to how to invest in a company. Which factors is

important for investor while investing in any company. A financial Ratio analysis also tells us

that which year it better or profitable. I take the decision of investment on following ratios such

as net profit, return on total assets, return on total equity and debt ratio. The comparison of net

profit of both years shows that 2015 has greater profit than 2013, 2014. Return on total asset is

also better of 2015 as compare to 2013, 2014. Return on total equity of is not good for 2015.

ratio anaylsis of nokia .. adeel ahmad wahla

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