Ratio Analysis
Liquidity Ratios 2012 2011 Current Ratio 20,025/24,025=0.83 17,003/27,075=0.63
Quick Ratio (7,138+10,744)/24,025=0.74 (6,252+9,259)/27,075=0.57
Activity Ratios Receivable Turnover 46,417/((10,744+9,259)/2)=4.6 45,884/((9,259+8,784)/2)=5.1
Inventory Turnover 31,546/((486+537)/2)=61.7 30,814/((537+433)/2)=63.5
Profitability Ratios Rate of Return on Assets 7,003/((139,576+151,220)/2)=4.8% 7,870/((151,220+156,985)/2)=5.1%
Rate of Return on (7,003-56)/((78,202+87,561)/2)=8.4% (7,870-58)/((87,561+90,810)/2)=8.8%
Common Stock Equity
Coverage Ratios Debt to Assets (24,025+37,349)/139,576=0.44 (27,075+36,584)/151,220=0.42
Times Interest Earned** (9,549-25)/25=381 (9,498-138)/138=67.8
**Note 4 in #5 of the “Notes to the consolidated financial statement” stated that Vodafone had an interest expense of £25 million in 2012 and £138 million in 2011 (see page 10).
What can you tell us about the liquidity, activity, profitability and coverage results for your company?
Vodafone’s liquidity ratios increased in 2012 from the 2011, showing that they are increasing their short term ability to pay their obligations due. In 2011, Vodafone’s liquidity ratios showed that they had a short term ability to pay for just over half of their obligations, whereas in 2012, they were able to pay for about three-quarters of their obligations.
Vodafone’s activity ratios decreased from 2011 to 2012. This would mean that they were less effective in the usage of their assets in 2012 versus in 2011.
Similar to their activity ratios, Vodafone’s profitability ratio’s decreased from 2011 to 2012. This would lead investors or creditors to believe that the success of Vodafone is declining, although not by much. For example, the rate of return on assets decreased because the both the net income and average total assets have been slowly declining since 2010, but the average total assets have declined at a steeper rate
Quick Ratio (7,138+10,744)/24,025=0.74 (6,252+9,259)/27,075=0.57
Activity Ratios Receivable Turnover 46,417/((10,744+9,259)/2)=4.6 45,884/((9,259+8,784)/2)=5.1
Inventory Turnover 31,546/((486+537)/2)=61.7 30,814/((537+433)/2)=63.5
Profitability Ratios Rate of Return on Assets 7,003/((139,576+151,220)/2)=4.8% 7,870/((151,220+156,985)/2)=5.1%
Rate of Return on (7,003-56)/((78,202+87,561)/2)=8.4% (7,870-58)/((87,561+90,810)/2)=8.8%
Common Stock Equity
Coverage Ratios Debt to Assets (24,025+37,349)/139,576=0.44 (27,075+36,584)/151,220=0.42
Times Interest Earned** (9,549-25)/25=381 (9,498-138)/138=67.8
**Note 4 in #5 of the “Notes to the consolidated financial statement” stated that Vodafone had an interest expense of £25 million in 2012 and £138 million in 2011 (see page 10).
What can you tell us about the liquidity, activity, profitability and coverage results for your company?
Vodafone’s liquidity ratios increased in 2012 from the 2011, showing that they are increasing their short term ability to pay their obligations due. In 2011, Vodafone’s liquidity ratios showed that they had a short term ability to pay for just over half of their obligations, whereas in 2012, they were able to pay for about three-quarters of their obligations.
Vodafone’s activity ratios decreased from 2011 to 2012. This would mean that they were less effective in the usage of their assets in 2012 versus in 2011.
Similar to their activity ratios, Vodafone’s profitability ratio’s decreased from 2011 to 2012. This would lead investors or creditors to believe that the success of Vodafone is declining, although not by much. For example, the rate of return on assets decreased because the both the net income and average total assets have been slowly declining since 2010, but the average total assets have declined at a steeper rate