Quickratio can also known as the acid test ratio, it can use to measure how well acompany can meet its short term financial liabilities. The quick ratio is amore conservative ways compare to current ratio.
Although the two are quitesimilar, but the quick ratio provide a more accurate assessment of a companyability to pay its current liabilities. The inventory has to deduct out fromthe calculation because it is not as rapidly convertibleto cash and is often sold on credit. In year 2014, Axiata Bhd quick ratio is0.
78:1. In year 2015, Axiata Bhd remain the company quick ratio in 0.78:1 sameas last year. Although there is no any increase in this year but also known asa good news for no decline too. But Axiata Bhd should also put more effort toensure the quick ratio is above 1 because there is not enough quick asset topay off the current debts.
In year 2016, Axiata Bhd quick ratio has drop to0.52:1. The ratio is bad than last two year.
Although the quick ratio is falltill 0.52 but this does not means that the company is going into default or bankruptcy,it maybe just the company is relying heavily on inventory or other assets topay it short term liabilities. A higher ratio can show better company liquidityposition, but if got too high of quick ratio it doesn’t mean a good standingbecause may indicate that the company has too much cashsitting in its reserves and also mean that the companyhas a high accounts receivables, indicating that the company may be having problemscollecting on its account receivables. Return on assets (ROA) is a financial ratiothat shows the percentage of profit a company earns in relation to its overallresources. ROA gives a manager, investor, oranalyst an idea as to how efficient a company’s management is at using itsassets to generate earnings. The ROA figure gives investors an idea of howeffective the company is in converting the money it invests into net income.
The higher the ROA number, the better, because the company is earning moremoney on less investment. In both year of 2014 and 2015 Axiata Bhd get 6% ofROA. In year of 2016, Axiata Bhd ROA has decrease to only 1%.
The Axiata Bhdshould reducing asset cost to increase the ROA. Thecompany can keep asset costs down by monitoring the asset expenses monthly. Forinstance, inventory counts as an asset for the ROA calculations. Reduce theinventory levels to our sales expectation this is because excessive inventorycan raise assets cost without producing more income. Other than that, theAxiata Bhd should find ways to increase the company revenuewithout increasing the assets cost. Its also can increase revenue throughimproved customer services or by exploring market segment that have not sold toin previous.
Return on equity (ROE) isthe amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’sprofitability by revealing how much profit a company generates with the moneyshareholders have invested. In year 2014, Axiata Bhd get 11% of ROE. This meansthat the shareholders will get the 11% of net income in order for theirinvestment. In year 2015 the Axiata Bhd ROE has increase 1% to 12%.
This seemsto be a good news to all investor as increase in their investment.Unfortunately, in year 2016 the ROE of Axiata Bhd has decrease to 3%. This ishappens maybe due to paying higher tax, a businessshould take advantage of any government policies, subsidies or incentives thatfavor its industry. For example, the government allows the informationtechnology industry certain tax breaks to encourage growth in the IT field.
Asa result, many IT companies have improved their return on equity. Furthermore,Operating efficiency can be measured by the net profit margin of a company, sobusinesses trying to increase their return on equity should focus on improvingand widening their margins by increasing their return on sales. That meanscompanies need to increase their return on sales at a rate faster than the risein their operating costs. Operating costs include everything from employeepayrolls to the raw materials needed to make goods, and inflation oftenincreases these costs.