Okie dokie, where do I start? We have spent the last 10 weeks playing around with the numbers we found in our company’s annual statements and now we need to make sense of them all. Up until now I have had most of my fun in the spreadsheet linking cells and creating mathematical equations. But now I am left with a whole lot of info and I am not sure where to start. Hence this post – As I reach out for help and to start the discussion happening!
When I am looking at the numbers this is what I am getting so far.
PCI-PAL was previously known as Ipplus. In late 2015 Ipplus change its name and sold off a lot of it business to only focus on PCI systems. Now offering a product that integrates into other business systems to offer compliance peace of mind while not disrupting the customer experience. By doing this it is clear to see from 2015 to 2016 there has been a major improvement across all aspects of the business, however still not all in the black.
But let me break it down to what I think I know.
Profitability Ratios:Both net profit margin and return on assets have improved dramatically from 2015. This is a result of the fact that there was a profit in 2016 whereas in 2015 there was a considerable loss. This is also a result of the decision to only focus on the PCI-PAL component of the business rather than multiple areas, reducing the trade administration costs dramatically while sales increased.
Efficiency (of asset management) Ratios:I couldn’t put a figure on the days of inventory line as my company is a service/computer software. So, there is not inventory as such. What my total asset turnover ratio is telling me is that PCI-PAL is making £1.95 to every £1 of assets. This is back to where it was prior to 2015.
Liquidity Ratios:This ratio helps me to understand the ability of PCI-PAL to pay back their short-term debt. Looking at the current ratio, PCI-PAL is in an okay spot with greater current assets than liabilities. Giving PCI-PAL the ability to quickly call on it assets if it was required to pay out the liabilities.
Financial Structure Ratios:I found these two quite interesting. I understand the debt/equity ratio shows that PCI-PAL has £1.09 to every £1 or equity. This is not necessarily very good, however when I googled it was recommended to find an industry average. I would be interested to see what other people in the unit have for theirs? On Investopedia.com it states Amazon INC has a debt/equity ratio of 274%. That’s huge! But I am a little unsure to what the equity ratio is telling me. Any ideas?
Market Ratios:Well first glance at this, it’s pretty poor. Shareholders of PCI-PAL are not making any money, well only minimal. I had to show more decimal points for the earnings per share and dividends per share otherwise both were showing as a zero.
Ratios Based on Reformulated Financial Statements:Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. This shows me PCI-PAL has improved a lot here, it is almost back to where it was in 2014. But still I would think is a low number. Same as return on net operating assets (RNOA) PCI-PAL has improved dramatically, but is still not where it was in 2013. I am not sure what the Net borrowing cost (NBC) is telling me. It’s something to do with the cost of PCI-PAL’s debt. But how does the percentage work? Thoughts? I might need to watch the lecture again and see how Maria explains it. I think by this stage in the lecture my head was spinning a little. The profit margin is easy, I’m glad to see PCI-PAL are making a profit again, I would be keen to see what others in the unit’s profit margins are. I’m assuming 2% is quite low. With saying that, you wouldn’t see a business with a huge profit margin, would you? You would want to see them reinvesting the profits? Asset turnover (ATO) is an interesting one, although PCI-PAL were in the negatives for a lot of 2016 this figure didn’t seem to be affecting. Again, I’ll be interested to see others and find similarities, as I can’t quite put my finger on what this means for PCI-PAL. Now that leaves only the grand finale economic profit, I won’t go into here as I will do a whole blog about this one on its own, so watch this space!
Please comment below if you want to chat further! You can also head over to my ASS #2 tab to see my company spreadsheet.
Bye for now,