Sector dominance ratio of financial market - MyAssignmenthelp.com

Question: Discuss about the Sector dominance ratio of financial market. Answer: Ratio Analysis Year-To-Year Comparison Based on the depiction of 2016 to 2017 the ROA has decreased from 5.5% to 5.2%. The ROC has reduced from 6.8% to 6.5%. The cash from operations has reduced from USD 1,269 in 2016 to $ 1,163.5 in 2017. In addition to this the cash from investing has also reduced. The current ratio and quick ratio has increased from 1.7x in 2016 to 3.5x in 2017 and 1.5x in 2016 to 3.2x in 2017. The total debt to capital has further increased from 129.4% in 2016 to 154.2% in 2017. The total debt to capital has increased from 56.4% in 2016 to 60.7% in 2017. Formula Descriptions ROA is calculated by net income reported for a period and dividing the same with total assets. ROC is EBIT divided by capital employed. Current ratio is current assets divided by current liabilities and quick ratio is current receivables added to short term investment divided by current liabilities. The total debt is to equity ratio is calculated by dividing total debt by total equity (Uechi et al. 2015). Explanations for changes The reducing trend of the ROA is visible because of the reducing income and profits in 2016 to 2017. The increasing liabilities has led to decreasing tendency of ROC in 2017. The cash from the investment activities has reduced due to Investment in Marketable Equity Security and high exposure to divestitures. The high amount of the current ratio clear shows that the company has not efficiently utilised its assets to pay the liabilities. The same is applicable for quick ratio as well (Hidayat and Meiranto 2014). Balance Sheet Analysis Year to year comparison The total cash and ST investment has been seen with an increase from 2016 to 2017. This has been seen to be evident with $ 1460.4 in 2016 and $ 3607.1 in 2017. The total receivables have been seen to increase from USD 403.5 to USD 421.9. The total current assets have been seen to be USD 2097 in 2016 and 4339.8 in 2017. The current liabilities have increased from $ 1210.7 in 2016 to $1257.7 to 2017. Fluctuations in terms of percentage The total fluctuation in terms of percentage for total cash and ST investment has been seen to be an increase of 147%. The total receivables have been seen to be based on an increase of 5%. The total current assets have been seen with an increase of 107%. The current liabilities have increased by 4%. The total liabilities have been depicted with an increase of 33% from 2016 to 2017. Rationale for the fluctuations The reason for the positive changes has been evident due to lower percentage increase in the current liabilities than the assets. Income statement analysis Year to year comparison The year to year comparison of total revenue has shown an increase of total revenue from $ 4145.8 in 2016 to $ 4453.3 in 2017. The gross profit has shown an increase from $1964.4 in 2016 to $ 2161 in 2017. The other operating expenses has shown an increase from $ 302.3 in 2016 to 353.2 in 2017. The operating income has hiked from $ 1662.1 in 2016 to $ 1807.8 in 2017. Fluctuations in terms of percentage Revenue has been depicted with a percentage increase of 7%. The percentage increase in the gross profit has been seen with 10%. The percentage increase in the operating income has been seen to be 9%. Rationale for the fluctuations The rationale for the increasing gross profit, operating income and total revenue is due to higher return from sales and thin increase in cost of goods sold. Reference List Hidayat, M. A. and Meiranto, W. (2014) Prediksi Financial Distress Perusahaan Manufaktur Di Indonesia, Diponegoro Journal of Accounting, 3(ISSN (Online): 2337-3806), pp. 111. Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J. and Kenett, D. Y. (2015) Sector dominance ratio analysis of financial markets, Physica A: Statistical Mechanics and its Applications, 421, pp. 488509. doi: 10.1016/j.physa.2014.11.055.