Financial ratios are a way to provide a general assessment of the financial position of a company and compare it with other companies (Liang et al., 2016). The comparison of the financial ratio of Apex Printing LLC with other companies in the same industry will enable Apex to see how its financial position compares to that of other companies. The two companies that have been chosen for the comparison are General Electric and Sony Media Corporation where the years 2018 and 2019 were chosen for the given companies. The comparison was done as shown in the following table.
| Financial Ratio | Apex (2013) | Sony Media (2019) | General Electric (2018) |
| Current Ratio | 1.29% | 0.83 | 1.81 |
| (Long-term) debt to equity ratio | 7% | 11.36% | 6.50% |
| Gross margin percentage | 21.74% | 40.56% | 23.80% |
| Net profit margin percentage | 15.28% | 10.57% | -18.75% |
| Return on equity percentage | 81.31% | 21.78% | -40.25% |
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Current Ratio
Current ratio is given by the current assets/current liabilities. A higher current ratio indicates that a company is in a better position to pay its debts (Awais et al., 2015). Apex printing has a relatively high current ration compared to the Sony Media indicating that it is better place to pay its current debt.
(Long-term) debt to equity ratio
The long-term debt to equity ratio is used to determine the leverage a business has undertaken. A high ratio is associated with high risk indicating that a business has financed its operations through the use of debt (Umniati et al., 2018). Apex printing has a relatively lower debt to equity ratio compared to Sony Media indicating that it does not have a lot of debt.
Gross Margin Percentage
It is used to calculate the profits after cost of goods sold are subtracted from revenues. A high gross margin percentage is good and Apex printing had a relatively low percentage indicating lower profits compared to the other companies.
Net Profit Margin
The net profit margin gives the revenue percentage after deducting taxes, expenses, and interests. Apex Printing had a relatively high percentage indicating that it operated its business correctly.
Return on equity percentage
The ROE is given by the net income divided by the total equity. Apex printing had a high ROE which was due to the large net income. A high ROE is an indicator of a good financial structure (Wen & Zhu, 2019).
Conclusion
Investors would find most of the ratios indicating positive trends apart from the gross margin percentage. The company may have to undertake measures to reduce cost of goods sold.
References
Awais, M., Hayat, F., Mehar, N., & Ul-Hassan, W. (2015). Do Z-Score and Current Ratio have Ability to Predict Bankruptcy?. Developing Country Studies , 5 (13), 30-36.
Liang, D., Lu, C. C., Tsai, C. F., & Shih, G. A. (2016). Financial ratios and corporate governance indicators in bankruptcy prediction: A comprehensive study. European Journal of Operational Research , 252 (2), 561-572.
Umniati, R., Titisari, K. H., & Chomsatu, Y. (2018, August). The Influence of Current Ratio, Inventory Turnover Ratio, Cash Turnover and Debt to Equity Ratio Against the Return on Investment in The Production of Industrial Companies Listed on The Stock Exchange Of Malaysia In 2016. In PROCEEDING ICTESS (Internasional Conference on Technology, Education and Social Sciences) .
Wen, H., & Zhu, T. (2019). Interpretation of Financial Statements.
