Liquidity Ratio: these ratios are useful to Al Meera Company to determine and measure its capacity to pay its compromises with banks and creditors.
■ Current Ratio: The calculations show a decrease between 2014 and 2015 from 1.93 to 1.65. That means that the company has 1.65 riyals of current assets per 1 riyal of current liabilities. The company reduced the cash and relative inventory positions from 2014 to 2015.
■ Quick Ratio: The calculations show an increase between 2014 and 2015 from 0.37 to 0.40. That means that the company has 0.40 riyals of cash equivalents per 1 riyal of current liabilities. Comparing the value with the current ratio, the availability of cash improved to pay short-term liabilities with an important reduction of the inventory availability for the group of stores that the company has in all the country.
■ Net Profit Margin: The calculations show an increase between 2014 and 2015 from 0.06 to 0.11 times the relation between the Net profit after taxes and sales. That means that the company generated 0.11 riyals of net profit after taxes per 1 riyal of sales. The company from 2014 to 2015 is obtaining more revenues for its sales due to the reduction in the sales costs.
■ Gross Profit Margin: The value stayed almost in the same value (0.17). That means that the company generated 0.17 riyals of sales minus costs of goods sold per 1 riyal of sales
■ Return on Investment: The calculations show an increase between 2014 and 2015 from 0.08 to 0.12. The Al Meera group generated 0.17 riyals of net profit after taxes per 1 riyal of total assets. The company improved its performance thanks to a reduction in the total assets compared to the sales. This is important information for the shareholders and creditors of the company.
■ Return on equity: The calculations show an increase between 2014 and 2015 from 0.11 to 0.16 of the Return on Equity ratio for the Al Meera Company. The company Al Meera received 0.16 riyal of net profit after taxes per 1 riyals of stockholders equity.
Activity Ratios: These ratios measure capacity of the company to transform its different accounts (assets, liabilities and equity) into revenue
■ Inventory Turnover: The calculations show a decrease between 2014 and 2015 from 13.35 to 12.66 times the average value of inventory reducing the capacity of the company to sell its average inventory. That means that the company generated 13.35 riyals in sales per 1 riyal of average inventory in the year.
■ Asset Turnover: The calculations show a decrease between 2014 and 2015 from 1.25 to 1.09 times the total assets. Comparing this trend with the inventory turnover, the company increased its assets without a proportional increase in sales. That means that the company generated 1.09 riyals in sales per 1 riyal of total assets of the in the year.
■ Fixed Asset Turnover: The calculations shows a decrease between 2014 and 2015 from 1.95 to 1.19 times the fixed assets following the same trend with the two previous ratios, asset turnover, and inventory turnover. That means that the company generated 1.95 riyals in sales per 1 riyal of fixed assets.
■ Average Collection Period: The value is almost the same, from 7.61 to 7.03 times the sales per year. That means that the company generated 7.03 riyals in account receivables per 1 riyal of average sales per day.The company must improve that number having a most aggressive collection policy with its clients and changing the structure of paying contracts.
Leverage Ratios: These ratios measure the capacity of the company to meet long-term liabilities.
■ Debt to Asset Ratio: The Company Al Meera Group maintained without change the structure of its debt related to total assets, from 0.28 to 0.27. That means that the company has 0.27 riyals of debt per 1 riyal of total assets.
■ Debt to equity ratio: The Company Al Meera Group maintained without change the structure of its debt related to total equity in 0.38 times the total equity. That means that the company has 0.38 riyals of debt per 1 riyal of stockholders equity.
In conclusion, the analysis of the Al Meera group financial ratios shows that the company was less effective to improve its revenues in 2015, that is, the company did not improve the sales with the inventory and fixed assets that the company has.
