FIN 201

ASSIGNMENT
Ratio Analysis based on Financial Annual Reports of companies

Sadman Sakib Ruhan /1/21 FIN201

RATIO ANALYSIS
Current Ratio 2018 2019

CE 1.62 times 1.58 times

EMN 1.82 times 1.86 times
SQM 4.32 times 3.45 times
HUN 1.84 times 1.87 times
ASH 1.59 times 1.89 times
2019
2018Current
CurrentRatio
Ratio

The current ratio is the ratio of current assets to

4.32
3.45

current liabilities; It Indicates a company's ability

to satisfy its current liabilities with its current
1.86 1.87 1.89
1.58
1.82 1.84 assets. After analyzing the ratios obtained above it
1.62 1.59

is clear that the highest number is achieved by

CE EMN
EMN SQM
SQM HUN
HUN ASH
ASH
SQM in 2018 which is 4.32 times. It refers that it
has a high ability to satisfy its current liabilities
with its current assets. And in 2019, it could be seen that SQM is again leading in the aspect with
a ratio of 3.45 though it is less than the previous year. On the other hand, EMN increased from
1.82 to 1.86 and ASH from 1.59 to 1.89, also HUN from 1.84 to 1.87. Only decrease is seen in
CE.

Quick Ratio 2018 2019

CE 1.03 times 0.98 times

EMN 0.96 times 0.93 times
SQM 2.67 times 2.19 times
HUN 1.13 times 1.41 times
ASH 0.98 times 1.1 times
2019Quick
2018 QuickRatio
Ratio

2.67
2.19

The quick ratio is the ratio of quick assets

1.41

1.1 (generally current assets less inventory) to

0.98 0.93 1.13
1.03 0.96 0.98

CE EMN SQM HUN ASH

CE EMN SQM HUN ASH
current liabilities: It Indicates a company's ability to satisfy current liabilities with its most liquid
assets. After analyzing the ratios obtained above it is clear that the highest number is achieved by
SQM in 2018 which is 2.67 times. It refers that it has a high ability to satisfy its current liabilities
with its most liquid assets. And in 2019, it could be seen that SQM is again leading in the aspect
with a ratio of 2.19 though it is less than the previous year. On the other hand, HUN increased
from 1.13 to 1.41 and ASH from .98 to 1.1. There is a decrease seen in CE, from 1.03 to .98 and
EMN from .96 to .93.

Net Profit Margin 2018 2019

CE 0.17 times 0.14 times

EMN 0.11 times 0.08 times
SQM 0.19 times 0.14 times
HUN 0.04 times 0.08 times
ASH 0.03 times 0.2 times

2018
2019Net
NetProfit Margin
Profit Margin
0.2
0.25 0.19
0.18 0.17
0.16
0.2
0.2 2019 Inventory
2018 InventoryTurnover
Turnover
0.14 98
7.44
8.27
0.12
0.15 0.14 0.11 0.14 87

0.1 6.07
6.84
76
6.41
5.58
0.08
0.1 6 5.65
0.08 0.08 5
0.06 4.18
5
0.04 4
0.04
0.05 0.03
4
0.02 3
3 2.48
1.98
00 2
CE
CE EMN
EMN SQMSQM HUN HUN ASH ASH 2
1
1
0
0 CE EMN SQM HUN ASH
CE EMN SQM HUN ASH

The net profit margin is the ratio of net income to sales and indicates how much of each dollar of
sales is left over after all expenses. After analyzing the ratios obtained above it is clear that the
highest number is achieved by SQM in 2018 which is 0.19 times. It refers that it has .19 times of
each dollar of sales that is left over after all the expenses. But in 2019 ASH took an
overwhelming lead of .17 times and stood with the highest ratio of .20 times.

Inventory Turnover 2018 2019

 CE 6.84 times 6.07 times
EMN 6.41 times 5.58 times
SQM 2.48 times 1.98 times
HUN 8.27 times 7.44 times
ASH 5.65 times 4.18 times

2019
2018
A/RA/R
Turnover
Turnover
Inventory turnover is the ratio of cost of goods sold
to inventory. This ratio indicates how many times,
inventory is created and sold during the period.
15%16% CE CE
22% 21%
EMN
SQM
EMN
SQM
After analyzing the ratios obtained above it is clear
HUN HUN
21%22% ASH ASH that the highest number is achieved by HUN in
26%
13% 14%
28%
2018 which is 8.27 times. It refers that HUN sold
and restocked its inventory more than 8 times in
2018. But it could not maintain the increase though
in 2019 it had the most times of inventory turnover
which is 7.44 times. Other than that, the rest of the companies faces a decrease in inventory
turnover from 2018 to 2019.

Accounts Receivable 2018 2019

Turnover
CE 7.04 times 7.41 times
EMN 8.8 times 9.46 times
SQM 4.78 times 4.53 times
HUN 7.37 times 7.13 times
ASH 5.5 times 5.18 times

Accounts receivable turnover is the ratio of net credit sales to accounts receivable. This ratio
indicates how many times in the period credit sales have been created and collected on. After
analyzing the ratios obtained above it is clear that the highest number is achieved by EMN in
2018 which is 8.8times. It refers that had more than 8 times in the period credit sales and had
been created and collected on. And in 2019 it increased by .66 times and became 9.46. Other
than CE and EMN, the rest three decreased.
 Total Asset Turnover 2018 2019

CE 0.77 times 0.66 times

EMN 0.63 times 0.58 times
SQM 0.53 times 0.41 times
HUN 1.18 times 0.82 times
ASH 0.45 times 0.34 times

Total Asset Turnover

2.5

0.82
2

0.66
1.5
0.58 1.18

1 0.41
0.77 0.34
0.63
0.53
0.5 0.45

0
CE EMN SQM HUN ASH

2018 2019

Total asset turnover is the ratio of sales to total assets. This ratio indicates the extent that the
investment in total assets results in sales. After analyzing the ratios obtained above it is clear that
the highest number is achieved by HUN in 2018 which is 1.18 times. It refers that HUN has a
high rate in the extent that the investment in total assets that results in sales. And in 2019 HUN
was again leading between the given 5 companies.

Fixed Asset Turnover 2018 2019

CE 1.11 times 0.94 times

EMN 0.8 times 0.73 times
SQM 1.21 times 0.97 times
HUN 1.88 times 1.49 times
ASH 0.57 times 0.43 times
 Fixed Asset Turnover
1.88

1.49

1.21
1.11
0.94 0.97
0.8
0.73
0.57
0.43

CE EMN SQM HUN ASH

2018 2019

Fixed asset turnover is the ratio of sales to fixed assets. This ratio indicates the ability of the
company’s management to put the fixed assets to work to generate sales. After analyzing the
ratios obtained above it is clear that the highest number is achieved by HUN in 2018 which is
1.88 times. It refers that it has high ability to put the fixed assets to work and generate sales with
them. And in 2019 HUN was again leading between the given 5 companies.

Total Debt to Asset Ratio 2018 2019

CE 0.38 times 0.43 times

EMN 0.39 times 0.36 times
SQM 0.31 times 0.38 times
HUN 0.29 times 0.34 times
ASH 0.31 times 0.23 times
 Total Debt to Asset Ratio
2018 2019
0.5
0.450.43
0.40.38 0.39 0.38
0.36
0.35 0.34
0.31 0.31
0.3 0.29

0.25 0.23
0.2
0.15
0.1
0.05
0
CE EMN SQM HUN ASH

The total debt to assets ratio indicates the proportion of assets that are financed with debt (both
short−term and long−term debt). After analyzing the ratios obtained above it is clear that the
highest number is achieved by EMN in 2018 which is 0.39 times. In 2019 it was CE with a ratio
of .43 times. Other than EMN and ASH, rest of the three companies increased comparing to the
previous years.

Long-term Debt to Asset 2018 2019

Ratio
CE 0.19 times 0.25 times
EMN 0.27 times 0.25 times
SQM 0.18 times 0.22 times
HUN 0.09 times 0.1 times
ASH 0.98 times 1.1 times
 Long term debt to asset
2018 2019
2.5

1.5

0.5

0
CE EMN SQM HUN AS H

The long−term debt to assets ratio indicates the proportion of the company's assets that are
financed with long−term debt. After analyzing the ratios obtained above it is clear that the
highest number is achieved by ASH in 2018 which is 0.98 times. In 2019 ASH remained at the
top as it increased to 1.1.

Debt to Equity Ratio 2018 2019

CE 0.32 times 0.36 times

EMN 0.37 times 0.35 times
SQM 0.31 times 0.31 times
HUN 0.28 times 0.26 times
ASH 0.28 times 0.21 times
 Debt to Equity

0.36 0.37
0.35
0.32 0.31 0.31
0.28 0.28
0.26

0.21

CE EMN SQM HUN ASH

2018 2019

The debt-to-equity ratio indicates the relative uses of debt and equity as sources of capital to
finance the company's assets, evaluated using book values of the capital sources. After analyzing
the ratios obtained above it is clear that the highest number is achieved by EMN in 2018 which is
0.37 times. In 2019 it was CE with a ratio of 0.36 times. The lowest in 2018 was HUN/ASH and
in 2019 was ASH with a ratio of 0.21 times.

Times Interest Earned 2018 2019

CE 13.08 times 9.59 times

EMN 6.5 times 5.08 times
SQM 12.16 times 6.46 times
HUN 9.19 times 4.52 times
ASH 1.84 times 1.61 times
2019 Times Interest Earned
2018
4%
6% The times interest earned ratio is a measure of a
17%
21% 31% company's ability to meet its debt obligations
35%
based on its current income. After analyzing the
ratios obtained above it is clear that the highest
24%
15%
28%
19%

CE EMN SQM HUN ASH

number is achieved by SQM in 2018 which is 12.16 times. It refers that SQM has a high
possibility to meet its debt obligations. But in 2019 it is CE with a ratio of 9.59 times.

Average Collection Period 2018 2019

CE 51.17 days 48.59 days

EMN 40.93 days 38.05 days
SQM 75.26 days 79.42 days
HUN 48.82 days 50.48 days
ASH 65.5 days 69.46 days

Ave rage Collecti on Pe riod

2018 2019
7 9 .4 2
7 5 .2 6

6 9 .4 6
6 5 .5
5 1 .1 7

5 0 .4 8
4 8 .8 2
4 8 .5 9

4 0 .9 3

3 8 .0 5

CE EMN SQM HUN ASH

The average collection period ratio measures the average number of days clients take to pay their

bills, indicating the effectiveness of the business's credit and collection policies. This ratio also
determines if the credit terms are realistic. After analyzing the ratios obtained above it is clear
that the lowest number is achieved by EMN in 2018 which is 40.93 days. It refers that
the average number of days clients take to pay their bills is almost 41 days. The smaller number
of days the better. And again in 2019 EMN held that result. And other than EMN and CE the
days count of the other three increased.
 i. Based on the ratio analysis in which company would I invest? The decision is made
based on the price to earnings ratio. The P/E ratios of the companies are as follow-

Price to Earnings Ratios 2018 2019

CE 11250.55 times 15342.8 times

EMN 11445.22 times 13013.93 times
SQM 26065.35 times 27636.51 times
HUN 19062.09 times 8307.77 times
ASH 41160.8 times 8910.3 times

For investment, the higher the P/E ratio, the better. And in 2018 the company with the highest
P/E ratio is ASH and in 2019 it is SQM. I would invest in them because, the P/E ratio shows
what the market is willing to pay today for a stock based on its past or future earnings. A
high P/E could mean that a stock's price is high relative to earnings and possibly overvalued.

2018
2019Inventory
InventoryTurnover
Turnover ii. Based on the ratio analysis in which
98

87
7.44
8.27
company would I supply raw materials
6.84
on credit? The decision is made based on
7 6.07
6 6.41
5.58
6 5.65
5
5
4
4.18 the inventory turnover ratio or using daily
4
3
3 2.48 credit sales. The ratios of the companies are
1.98
22

1 as follow-
00
CE
CE EMN
EMN SQM
SQM HUN
HUN ASH
ASH

With the following ratios HUN has the highest inventory turnover in 2018 and again in 2019
HUN has the highest ratio. So, I would select HUN for the supply of raw materials on credit. As
this ratio indicates how many times, inventory is created and sold during the period. So, it would
be profitable to supply to them.

iii. Based on the ratio analysis in which company would I provide long term loan as a
banker? The decision is made based on the times interest earned ratio and using debt to
asset ratio. The ratios of the companies are as follow-
 2019 Times Interest Earned
2018
6%4%

Total Debt to Asset Ratio

17%
21% 31%
35% 2018 2019
0.5
0.43
0.45
0.38
0.4 0.39 0.38
0.36
0.35 0.34
0.31 0.31
24% 0.29
0.3
15%
0.25 28% 0.23
19%
0.2
0.15
CE EMN SQM HUN ASH
0.1
0.05
0
CE EMN SQM HUN ASH
The
total
debt to assets ratio indicates the proportion of assets that are financed with debt (both
short−term and long−term debt). And the times interest earned ratio is a measure of a
company's ability to meet its debt obligations based on its current income. After
analyzing the times interest earned ratio, it is evident that CE has the highest chance of
meeting its debt obligations in 2018. And as I am a banker, I would give loan to CE as
CE can meet its debt obligations based on its current income. And also, in 2019 CE still
has the highest ratio among the given companies. So I would give loan to CE both in
2018 and 2019.