Analysis of Financial Condition

a.         Liquidity Analysis

In the current ratio, if the value less than 1, it’s mean the company has a short-term liabilities or obligation problem. According to data above we know that all of current ratio from year 2005 until 2010 had value more than 1, so in this case PT. Mayora Indah has no problem with their short-term liabilities or obligation.

The cash ratio ignores inventory and receivable, in this cash ratio higher value of ratio means better performance at the company. According to data above, all of the value of cash ratio that PT. Mayora Indah have from year 2005 until 2010 have value less than 1. It’s mean that PT. Mayora Indah doesn’t have some cash to cover all of their current liabilities, but it’s reasonable because it’s very rare there is a company that have some cash that can cover all of their current liabilities.

The acid test ratio (quick ratio) is almost the same with the current ratio, the different between them is in the quick ratio the company’s inventories have some effect to the ratio. In this ratio, if the value of the ratio is less than 1, it’s mean the company have problem with their inventory. According to the data above all of the quick ratio have value more than 1, so PT. Mayora Indah doesn’t have the inventory problem. If the ratio higher it’s means the company have a good condition of inventories and PT. Mayora Indah have a good condition of their inventories in year 2005 because in that year the value of the ratio is the highest than the other.

b.      Efficiency Analysis

Both of them showed ‘similar’ trend of fluctuation for both Inventory Turnover and Accounts Receivable, where the one which made changes were in net sales (as CGS in inventory turnover ratio) as numerator, while it is better for accounts receivable to steadily grew down (not keeps growing up as Inventory) while net sales—as numerator—sharply grew up. This condition told us that in further period the company is in, the more amount of money which can be converted as cash earned, thus support the liquidity of the company to quicken its flow of money. Make it easier to open new projects as the money is available.

In this subtitle, we can conclude that the best grown efficient factor in this company is in accounts receivable, while in its inventory the company faced fault but has been getting more efficient after 2008. For the assets efficiency of this company, we can know from data that that the most data is in fixed assets turnover to be better, while in total assets not to be so sharply changed. In such a case, we can conclude that company has been getting smarter in using fixed assets to operate its business (therefore inventory efficiency came better).

c.       Leverage Analysis

When we want to analyze the financial leverage of a company, we can use leverage ratios. Leverage ratios (Capitalization ratios) are the measures of the relative contribution of stockholders and creditors, and of the firm’s ability to pay financing charges (value of firm’s debt to the total value of the firm). In year 2005 until 2010, the debt ratio is 0,5362, that mean if PT Mayora Indah, Tbk used their 53,62% of their debt to fund their assets. The company’s equity ratio is decreasing up to 0,4527 (higher risk than previous year) from year 2005-2010.

Times interest earned (TIE) ratio measures how well a company has its interest obligation covered, and it’s often called the interest coverage ratio. For PT. Mayora Indah Tbk, their TIE ratio is increasing for each year. Up to 2010 this company can cover their interest bill 8,81 times over (this is a good sign for this company).

d.      Profitability Analysis

Profitability ratios are ratios that determine the company’s ability to produce profits. The company’s ability to produce profits is high during the period when the profitability ratios are high as well. In other words, higher the profitability ratios indicate that the company’s ability to produce profits is better.

During the year of 2010, almost all profitability ratios of this company experienced a decrease in value except ROE. Net Profit Margin value for the year of 2010 decreased from 0.0779 to 0.067. If this value decreases, we can assume that the income from the sale of one unit also decreases. Moreover, the ROA value during 2010 decreased from 0.1146 to 0.11. Then the firm’s ability to generate income from investment is decreased during 2010.