Gemini Electronics

GEMINI ELECTRONICS Gemini Electronics was a U.S based manufacture of TVs, LCD, DVD players, Home teatre sound systems and cable sets. !n "anuary #$%$ tey formed ad oc Committee of senior mana&er at Gemini Ge mini to study different &rowt options. Te options were as follow' • •

Continue to focus on TVs (ut to e)pand Geo&rapically !ncrease *roduct +fferin&s

or accessin& te company-s financial condition before tain& ta in& any decision te mana&ement ire a consultant to e/aluate Gemini financial condition. Consultant maes financial ratio analysis, ori0ontal and /ertical analysis of financial statements of Gemini electronics from year #$$12 #$$3.

Ratio analysis NOTE: All the financial figures we used for calculations are taen fro! the annual financial re"ort of Ge!ini electronics for year #$$% and #$$&

'( C)RRENT RATIO Current 4atio 5 current assets 6 current liabilities. #$

%$#$$&

5439170231

Current Ratio*

2161277587

Current Ratio* #(+# ti!es

6013296190

Current 4atio5

2349963070

Current 4atio5 #.17 times

Inter"retation

Te or&ani0ations a/in& current ratio more tan % sows tat or&ani0ation as more assets ten its liabilities. !n tis case it is clear tat it as 8#.1# in assets to co /er 8% liabilities in #$$9 and 8#.17 in assets to co/er 8% liabilities in #$$3. (ut tey a/e fewer ratios tan industry a/era&e wic is not &ood.

#( CAS, RATIO

Current 4atio 5

Current Assets − Inventories−

A Rec 6 current liabilities. C

#$

%$#$$&

CAS, RATIO * 5439170231 − 2744119895−1328523975

CAS, RATIO 5 6013296190 −3096261450 −1503560340

2161277587

2349963070

CAS, RATIO * $(-. ti!es

CAS, RATIO 5 $.7$ times

Inter"retation

Te or&ani0ations a/in& cas ratio less tan % sows tat or&ani0ation as less assets ten its liabilities. !n tis case it is clear tat it as 8$.7: in #$ $9 and 8$.7$ in #$$3 to co/er 8% liabilities wic !s not &ood for Gemini electronics but tey are far better tan industry a/era&e wic is ;ust $.$1.

.( ASSET T)RNO/ER RATIO

Net sale Total assets

#$

%$#$$&

12175476500

Asset Turn0o1er*

8321331107

Asset Turn0o1er* '(2- ti!es

13664714160

9957696704

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te asset turno/er of %.>7 and %.:= in #$$3 and #$$3 respecti/ely, wic is /ery &ood e/en tou& it is decreased little bit #$%% but still it is /ery &ood. !t means tat te utili0ation of assets is in &ood position and it is also better tan te industry. !t is indictin& tat ow muc te company as te efficiency in maintainin& te operations of te company.

2( 3ARTS IN/ENTOR4 T)RNO/ER RATIO COGS Raw Inventory

4aw. !n/entory Turn2o/er5 #$

%$#$$&

7886796000

In1entory Turn0o1er*

1062819180

In1entory Turn0o1er*5(2#

8974149576

!n/entory Turn2o/er5

1201345530

!n/entory Turn2o/er5=.>=

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te raw material !n/entory turno/er of =.># and =.>= in #$$9 and #$$3 respecti/ely, wic is /ery &ood.

+( 3ARTS IN/ENTOR4 3ERIO6 Inventory

!n/entory *eriod5

365

¿

¿

#$

%$#$$&

365

In1entory 3eriod*

7.42

In1entory 3eriod* 2&('& days

365

!n/entory *eriod5

7 . 47

!n/entory *eriod5 >9.97 days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te 4aw !n/entory period of >3 and >9 days in #$$9 and #$$3 respecti/ely, wic is not /ery &ood because it is i&er tan industry a/era&e of :#.

-( 7I3 IN/ENTOR4 T)RNO/ER RATIO

?!* !n/entory Turn2o/er5

COGS WIP Inventory

#$

%$#$$&

7886796000


75640210

In1entory Turn0o1er*'$2

8974149576


89575400

!n/entory Turn2o/er5%$$.%9

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te ?!* !n/entory turno/er of %$> and %$$ in #$$9 and #$$3 respecti/ely.

5( 7I3 IN/ENTOR4 3ERIO6 Inventory

?!* !n/entory *eriod5

365

¿

¿

#$

%$#$$&

365

In1entory 3eriod*

104

In1entory 3eriod* .(+' days

365

!n/entory *eriod5

100

!n/entory *eriod5 :.71 days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te ?!* !n/entory period of :.1% days and :.71 days in #$$9 and #$$3 respecti/ely, wic is /ery &ood because it is far better tan industry a/era&e of =.93 days.

%( 8G IN/ENTOR4 T)RNO/ER RATIO COGS FG Inventory

G !n/entory Turn2o/er5 #$

%$#$$&

7886796000


1605660505

In1entory Turn0o1er*2(&'

8974149576


1805340520

!n/entory Turn2o/er5>.3=

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te G !n/entory turno/er of >.3% and >.3= in #$$9 and #$$3 respecti/ely.

&( 8G IN/ENTOR4 3ERIO6 Inventory

!n/entory *eriod5

#$

%$365

¿

¿

#$$&

365

In1entory 3eriod*

4.91

In1entory 3eriod* 52 days

365

!n/entory *eriod5

4.97

!n/entory *eriod5 =:.>> days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te G !n/entory period of => and =:.>> days in #$$9 and #$$3 respecti/ely, wic is also /ery &ood because a/era&e industry turno/er is %99 days.

'$( A/G COLLECTION 3ERIO6

A / cReceivables Avgdaily sale

#$

%$A1g Collection 3eriod * 1328523975

#$$&

1503560340

37437573

33357470

A1g Collection 3eriod * .&(% days

40.16 days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te $.%7 days in #$$9 and #$$3 respecti/ely, wic means tat tey recei/e cas from teir creditor on a/era&e in :3 days in #$$9 and in >$ days in #$$3. !n #$$3 DS+ increase wic is not &ood for te or&ani0ation and also tey a/e i&er DS+ as compared to industry.

''( 6E9TE;)IT4 RATIO

Debt6e@uity ratio 5

Totaldebt total equity

#$

%$#$$&

3911083724

6e
2900817082

4713195721

Debt6e@uity ratio 5

3680070533

A%$$

>'$$

Debt6e@uity ratio5%.#9 6e
Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te Debt6e@uity ratio of %.:1B and %.#9B in #$$9 and #$$3 respecti/ely, wic means tat tey a/e debt of %:1B of total e@uity in #$$9 and %#9B of e@uity in #$$3 wic is not &ood for stoc olders because company-s default ris is /ery i& and it is also &reater tan industry a/era&e of $.1.

'#( GROSS 3RO8IT ? AGE

Gross profit B a&e 5

Gross Pro it A%$$ Net sale

#$

%$#$$&

4288680500

Gross "rofit ? age *

12175476500

4690564584

Gross profit B a&e 5

13664714160

A%$$

>'$$

Gross profit B a&e 5 :>.:#B Gross "rofit ? age * .+(##?

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te &ross profit ratio of :1.##B and :>.:#B in #$$9 and #$$3 respecti/ely, wic means tat tey earn 8:1.## in &ross profit by

in/estin& 8%$$ in #$$9 and 8:>.:# in #$$3 respecti/ely wic is &ood but tey are beind te industry a/era&e.

'.( NET 3RO8IT ? AGE Net Proit aetrta! et profit B a&e 5 A%$$ Net sale

#$

%$#$$&

853087156

Net "rofit ? age *

12175476500

779253450

et profit B a&e 5

13664714160

A%$$

>'$$ 7

Net "rofit ? age *


5.7

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te net profit ratios of =B and 1.=B in #$$9 and #$$3 respecti/ely, wic means tat tey earn 8= in net profit b y in/estin& 8%$$ in #$$9 and 81.= in #$$3 respecti/ely wic is /ery &ood because it is muc i&er tan industry a/era&e.

'2( O3ERATING 3RO8IT ? AGE "#IT Net sale A%$$

O"erating profit B a&e 5

#$

%$#$$&

1590128722

Net "rofit ? age *

12175476500

1528775163


13664714160

>'$$ Net "rofit ? age *

13.1


11.2

A%$$

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te operatin& profit ratios of %:.%B and %%.#B in #$$9 and #$$3 respecti/ely, wic means tat tey earn 8%: in net profit by in/estin& 8%$$ in #$$9 and 8%%.# in #$$3 respecti/ely wic is /ery &ood because it is abo/e tan industry a/era&e of =.>%B.

'+( R ET)RN ON ASSET

4eturn on asset 5

Net Proit Total Assets A%$$

#$

%$#$$&

853087156

Return on asset *

8321331107

Return on asset *

10.25

779253450

>'$$

4eturn on asset 5

9957696704

4eturn on asset 5

A%$$

7.82

Inter"retation

Te percenta&es of two consecuti/e years are sowin& tat te company is profitable as relati/e to its total assets.
#$$9 to %$.#1B and in #$$3 tey a/e 4+< of =.9#B. ! will say tat te company is in &ood position in &eneratin& te re/enue by its assets for last two consecuti/e years but teir 4+< is decreased in te last year because teir total assets increased %3B in #$$3 and teir income decreased 9.>7B in #$$3 wic is not &ood si&n for Gemini electronics but tey are far better tan industry a/era&e of :.:#B.

'-( R ET)RN ON E;)IT4

4eturn on E@uity 5

Net Proit Total "quity A%$$

#$

%$#$$&

853087156

Return on E=uity *

2900817082

Return on E=uity *

779253450

>'$$

29.41

4eturn on E@uity 5

3680070533

A%$$

4eturn on E@uity 5 21.17

Inter"retation

Te percenta&es of two consecuti/e years are sowin& tat te company is profitable as relati/e to its total e@uity. %B and in #$$3 tey a/e 4+E of #%.%=B. ! will say tat te company is in &ood position in &eneratin& te re/enue by its E@uity for last two consecuti/e years and tey are muc better tan industry a/era&e of 7.7B.

'5( 8I@E6 ASSET T)RNO/ER RATIO(

i)ed
#$

%$Total Net sale assets ¿ ¿

#$$&

8ied( Asset Turn0o1er*

i)ed.
12175476500

13664714160

2882160876

3944400514

8ied( Asset Turn0o1er* 2(##

i)ed. 7

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te fi)ed asset turno/er of >.## and :.>7 in #$$9 and #$$3 respecti/ely, wic is /ery &ood e/en tou& it is decreased little bit in #$$9 but still it is /ery &ood. !t means tat te utili0ation of fi)ed assets is in &ood position. !t is indictin& tat ow muc te company as te efficiency in maintainin& te operations of te company and also tey are better tan industry a/era&e of #.>#.

'%( O3ERATING C4CLE +peratin& Cycle 5 DS+ !n/ T+ in days2 <6C payable T+ #$'$

#$''

O"erating Cycle * 2$B'#-05$

+peratin& Cycle 5 >$.%7%#727:

O"erating Cycle * &- days

+peratin& Cycle 5 %$: days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te +peratin& cycle of 37 days and %$: days in #$$9 and #$$3 respecti/ely, wic means from startup of operations to te profit tey too 37 days in #$$9 and %$: days in #$$3. !n #$$3 te time increased because payable turno/er decreases in #$$3 but still tey are /ery &ood as compared to industry a/era&e of %3# days.

'&( TIMES INTEREST EARNE6 "#IT Ti!es interest earned 5

∫ "!$ense A%$$

#$

%$#$$&

1590128722

Ti!es Int( Earned*

277686944

1528775163

Times !nt. Earned5

329923700

>'$$ Ti!es interest earned * 2(-. Ti!es interest earned * +(5.

#$( A/G 3A4A9LE 3ERIO6

COGS Acc Payable

A%$$

#$

%$#$$&

A1g 3aya

7886796000

8974149576

1509430300

1564430450

A1g 3aya

63 days

Inter"retation

Te result of te ratio is sowin& tat Gemini electronics ad te
Te financial ratios were di/ided into four parts'2 '( Li=uidity particularly interestin& to sort2term creditors • it is focus on current assets and current liability • General rule for te current ratio sould be at least #'% •

or te Gemini Electronic te current ratio is consistent and it is increase in year #$$7. (ut we note tat Gemini Electronics is sli&tly less li@uid tan te a/era&e firm in te industry because te current ratio is lower tan te industry a/era&e.

#( Assets !anage!ent

(ot fi)ed assets turno/er and total asset turno/er are i&er tan industry a/era&e,

•

indicatin& tat Gemini Electronics is usin& its asset efficiently tan te industry a/era&e in &eneratin& sales. !n term of collectin& recei/ables your sales money, Gemini Electronics was

•

becomin& slow durin& year #$$3. +ne of te causes is many retailers clients demanded more &enerous credit terms tan net :$ days, wic standard in te industry. (esides tat, interest was also not car&ed on o/erdue account. :. Lon&2term debt payin& ability Gemini ElectronicsI debt ratio and debt e@uity ratio indicate tat Gemini Electronics is •

•

more le/era&ed tan te a/era&e firm in industry. Le/era&e means te amount of debt used to finance a firmJs assets. < firm wit si&nificantly more debt tan e@uity is •

considered to be i&ly le/era&ed. Te i&er le/era&e e)plains Gemini Electronics poor financial performance relati/e to te electronics industry because te le/era&e commits Gemini Electronics to interest

4. •

payments tat must be paid re&ardless of economic and maret conditions. *rofitability Te ratios indicated tat Gemini Electronic as a i&er cost of sales tan te a/era&e firm in te electronics industry, resultin& in a lower &ross profit mar&in, and (ut due to lower 4KD cost, resultin& in i&er net profit mar&in performance relati/e to te electronics industry.

Reco!!endations Gemini Electronics operatin& profit mar&in and net profit mar&in is better tan industry but a/e lower Gross *rofit mar&in wic means tat tey are incurrin& more cost on raw material tan industry. Tey need to in/est in 4KD and comes up wit inno/ations lie Samsun&. Tey also need to decrease debts from teir capital structure to decrease te default ris.

Gemini Electronics

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