Megaworld: An Analysis Of Liquidity Ratio

Good Essays
Analysis of Liquidity
Liquidity Ratios:
Liquidity ratios are the ratios that measure the capacity of an organization to meet its fleeting obligation commitments. These ratios measure the capacity of an organization to pay off its transient liabilities when they fall due. The liquidity ratios are an aftereffect of separating cash and other fluid resources by the fleeting borrowings and current liabilities. They demonstrate the quantity of times the transient obligation commitments are secured by the cash and fluid resources. On the off chance that the quality is more noteworthy than 1, it implies the fleeting commitments are completely secured.

By and large, the higher the liquidity ratios are, the higher the edge of wellbeing that the organization
…show more content…
Regularly satisfactory current ratio is 2; it’s an agreeable cash related position for most ventures. In the recent study, Megaworld Corporation has higher current ratios than Ayala Land from 2011 to 2013. Hence, Megaworld is more capable of paying its short term debts than Ayala Land. The trend of Megaworld’s current ratios has lost its consistency of increasing in 2013. On the other hand, Ayala Land’s current ratio in 2011 went down on 2012 and recovered on 2013.

On the off chance that the current ratio is too high, the Megaworld may not be utilizing its current resources or it’s fleeting financing offices productively. This may additionally demonstrate issues in meeting expectations capital administration. In this case, the current industry average ratio is 1.2. Both Megaworld and Ayala Land are above average when it comes to current ratio. In addition, it is expected for real estate industry to have low current ratio for they are investing on non-current assets like real property which is the nature of their
…show more content…
Megaworld performs better in having higher quick ratios than Ayala Land. However, investors may not be happy with higher quick ratios. It is because of the assumption that the organization should maximize its assets capacity to expand the business that would generate larger revenue and increase shareholder’s wealth. It reflects to the extent that Ayala Land has more invested on real estate than Megaworld in these financial ratios.

Liquidity Ratio Summary Using two liquidity ratios, the results have shown that Megaworld has more current assets to pay for its short term debts than Ayala Land. Megaworld can pay twice as much as Ayala Land for every P1.00 debt. However, due to the industry where they both belong, it seems like Megaworld is not maximizing its current assets in investing on non-current, in particular real properties which is the nature of the business.
CASH FLOW FROM OPERATIONS An accounting item indicating the cash an organization brings in from ongoing, regular business activities, such as manufacturing and selling goods or providing a service. In this paper, we would examine the business activities of Megaworld and Ayala Land. Both of the companies are under real estate industry. This portion of paper would examine and interpret the trends of their cash inflows from developing and selling real estate

Related Documents

  • Decent Essays

    In case of NIIT this ratio was 0.64 in 2010 whereas in 3i Infotech it was 0.87. Here NIIT was more financial stable than 3i Infotech. But in last year the ratio of NIIT went to 0.26 in year 2013 and 0.24 of 3i Infotech. From this it can be concluded that 3i Infotech is more financial stable than NIIT. • In table 9 fixed asset turnover ratios of NIIT and 3i Infotech has been calculated.…

    • 1545 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    The debt to equity ratio measures a company’s financial leverage by dividing its liabilities by its equity. A high ratio indicates a company is using too much financing to grow. Although financing is a great tool for increasing production and capital, it is significant that CanGo shows financial growth so that higher earnings can be distributed to shareholders rather than cash flow going to repaying debts. Barnes & Noble’s most recent debt to equity ratio is 0.33 (Businessweek.com, 2014), CanGo’s is 0.67 which is notably higher than the industry average. Still, other ratios tell us that CanGo is not financing its growth enough, and is being too cautious with its capital.…

    • 716 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    The debt management ability of Honda Atlas Cars ltd, compared to other firms in the industry, is not very good. Honda Atlas Cars ltd heavily relies on creditors to finance company operations. The Debt ratio of the company is a lot higher than the industry average. Honda’s 80.6 % of the assets are financed through debt where an average business with in the same industry has only 45.4% of its assets financed through debt. Moreover, Honda has a higher Debt to equity ratio as well compared to its major competitors.…

    • 1553 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    The quick ratio which measures short term obligations, suggests that Wal-Mart is capable to pay its creditors and has above average number than the industry. The inventory ratio proves Wal-Mart is the best as it sells a lot more products than its competitors. The inventory is always moving because Wal-Mart sets its prices to sell. The debt ratio of Wal-Mart is good but not the best however has done better than most of its competition. Wal-Mart has a larger net worth and market cap than any of its competitors.…

    • 1883 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Tal Lanka Hotels PLC performed well than Sigiriya Village Hotels PLC by maintaining lower debtor turnover ratio throughout the period. As a result of higher debtor turnover than Sri Lanka Telecom PLC, Dialog Axiata PLC exposes to higher debtor collection period and risk of bad debts. It is recommend to Tal Lanka Hotels PLC to match debtor collection strategies with operational cash flows requirements. Further effective and flexible debtor collection methods leads to the increase to sales. d) Debtor turnover…

    • 1304 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    For example, if one company plan to issue more shares to collect more money, the return on equity of this company will be lower. In contrast, if this company wants to buy back the outstanding shares, the return on equity of this company will be higher. Although these financial activities unrelated with operation, the data of ROE…

    • 1329 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    In this situation, lower ratios are desirable. A high debt to equity ratio would spark concern for investors because it would reflect that the company cannot repay its liabilities if the need would present itself. For Moserk, it is just slightly higher than the industry standard. Moserk is at 1.22 and the average is 1.20. They are relatively close to a desirable ratio.…

    • 709 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Therefore relative to competitors Fast Go finances a majority of investments through owners’ equity, which leads to slower growth but a more stable financial gearing. Interest Coverage The interest coverage ratio measures how many times the company can cover the interest expense with net income. - The interest coverage ratio decreased for Speedy Deliveries from 9 to 3 times. With an increase in net income for the period, this leads to the assumption of a substantial increase in the interest expense. This can be expected for a company financed substantially through debt as shown by the debt ratio.…

    • 1339 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    Return on Capital Investors use this ratio to see how efficiently the company uses their capital. ROC measures the efficiency of a company to use its money invested in its operations. From the above graph it can be seen that ROC has decreased from 27.8% in 2004 to 4.01% in 2013. The increase in ROC in the year 2008 was due to POSCOS’s higher than expected profit margin during recession while the decrease in 2009 was expected as capital employed increased even more as POSCO was one of the few companies to show a high return during the recession. Return on Owner’s…

    • 995 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    How is Financial Structure of Company different from Project Financing? Under company finance, in the principal stage of organization, financier searches for business evidence of the idea, however, when it comes to project financing, they search for the anticipated cash flow. The risk of the investor in company finance is much higher compared to project financing. When the company financing risk is higher it means that the return (ROI) are generally higher. Although in project financing the returns are generally lesser due to the lower risk 4.…

    • 1321 Words
    • 6 Pages
    Decent Essays