“Farg’ona yog’-moy” aj

Finance
Tashkent institute of finance



“Farg’ona yog’-moy” AJ
ABDUSATTOROV MUHAMMADDIYOR MMT 80I

1.Introduction

I calculated the profitability ratios in three different years of the enterprice called “Farg’ona yog’-moy” AJ so that I can know whether it is risky or not to put the money in it.

Profitability ratios are a class of financial metrics that are used to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders' equity over time, using data from a specific point in time.
Profitability ratios can be compared with efficiency ratios, which consider how well a company uses its assets internally to generate income.

I did also try to calculate the assets turnover ratios in order to clarify the risk with some specific ratios.

The asset turnover ratio measures the value of a company's sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue.
The higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.
The asset turnover ratio tends to be higher for companies in certain sectors than in others. Retail and consumer staples, for example, have relatively small asset bases but have high sales volume—thus, they have the highest average asset turnover ratio. Conversely, firms in sectors such as utilities and real estate have large asset bases and low asset turnover.
Financial leverage ratios
A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage ratio category is important because companies rely on a mixture of equity and debt to finance their operations, and knowing the amount of debt held by a company is useful in evaluating whether it can pay off its debts as they come due.

In 2019, the debt ratio went up a little, however in 2020 this ration declined to 0.66.And the same situation with Debt to equity ratio as well.

Liquidity ratios
Liquidity ratios are an important class of financial metrics used to identify a debtor's ability to pay off current debt obligations without raising external capital. Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the calculation of metrics including the current ratio, quick ratio, and operating cash flow ratio.
Liquidity is the ability to convert assets into cash quickly and cheaply. Liquidity ratios are most useful when they are used in comparative form. This analysis may be internal or external.
For example, internal analysis regarding liquidity ratios involves using multiple accounting periods that are reported using the same accounting methods. Comparing previous periods to current operations allows analysts to track changes in the business. In general, a higher liquidity ratio shows a company is more liquid and has better coverage of outstanding debts.
The Current Ratio
The current ratio measures a company's ability to pay off its current liabilities (payable within one year) with its total current assets such as cash, accounts receivable, and inventories. The higher the ratio, the better the company's liquidity position:
The Quick Ratio
The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets and therefore excludes inventories from its current assets. It is also known as the acid-test ratio.

The table says that the company’s cash ratio has grown over 3 years and it means that cash has grown more than total debt.

But, the final result of Quick ratio declined in comparison to the first year, which means that the Current asset increased less than the current liabilities.