Associated British Foods plc
- Coportate introducanctian
- Finacial performance
- Analysis of the company’s solvency
a: Short term solvency analysis. Solvency refers to the company’s ability to repay debts within a specified period of time. According to the company’s balance sheet in 2017-2018, the current ratio, quick ratio, cash ratio and balance sheet ratio are calculated respectively as shown in Table 1:
The company’s current ratio, quick-frozen ratio and cash ratio all showed a downward trend in 2017-2018, among which, the current ratio of 2018, which is generally considered to be the more appropriate current ratio of about 2:1, is 1.63, down from 1.65 in 2017, which is generally good. Compared with the current ratio, the quick ratio can better explain the problem. Generally speaking, the best quick ratio is 1. The company’s quick ratio decreased in 2018 and 2017 but remained at the standard value of 1, indicating that the financial situation and short-term solvency of company are still good. The current ratio and quick ratio in 2018 are lower than that in 2018
b.Long term solvency analysis
From table 1, it can be seen that the asset liability ratio decreased slightly during 2017-2018, and the ratio did not exceed 50%. The increase of asset liability ratio means that the financial risk increased, while the assets of the enterprise increased from 12810m to 13692m in these two years, and the liabilities decreased from 4398 to 4396m, indicating that the enterprise’s capital has increased and the pressure of liability operation has been reduced.
（2）Operational capacity analysis
The operation ability reflects the turnover of the enterprise’s capital and is a way to understand the operation and management level and operation status of the enterprise. As can be seen from table 2, the inventory turnover rate of the company in 2018 is 8% lower than that of the previous year. This downward trend indicates a decline in the company’s operating capacity. At the same time, the turnover rate of current assets and total assets decreased slightly in 2018 compared with that in 2017, while the turnover rate of fixed assets increased by 13.7%, indicating that the use efficiency of fixed assets of enterprises has improved, but the ability to use all assets for business activities is insufficient. Overall, the company’s operating capacity in 2018 is declining compared to 2017.
The net sales interest rate shows the proportion of the company’s net profit in operating revenue. From the above table, it can be seen that the net sales interest rate of the company decreased from 12.7% in 2017 to 11.8% in 2018, and the gross sales interest rate remained at 10%, indicating that the cost bearing capacity is good, but the profitability is insufficient. Again, asset profit rate and return on shareholders’ equity are declining, indicating that the company’s profitability is poor.
（4）Development capacity analysis
The development of an enterprise is the growth of its value, which will bring its ability of cash flow in the future. However, the growth of its value is also affected by its risk, profitability and growth. From the above table, we can see that the growth rate of sales in 2018 remains stable, the growth rate of its operating revenue is small, but the growth rate of its total assets is greatly reduced, which indicates that the expansion speed of its operating scale is slowing down, and the development of the enterprise Capacity has declined.
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