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Novozymes Case Solution & Answer

Novozymes Case Solution

Common size income statement

In common size income statement total revenue is taken as base and each value is then expressed as a percentage of value of sales. The company has greater portion of sales as gross profit that is 57%. While net profit is 20%. There is great portion of expense as percentage of sales which is 43%.

3. Calculate the following financial ratios for Novozymes for the years 2006 to the year 2014.
2014 2013 2012 2011 2010 2009 2008 2007 2006
Profitability
Gross Margin 57% 57% 57% 137% 56% 56% 54% 53% 54%
Operational margin 27% 25% 24% 54% 22% 20% 18% 20% 20%
Net Margin 20% 19% 18% 42% 17% 14% 13% 14% 13%
Return On Assets 14% 13% 13% 13% 13% 11% 11% 12% 11%
Return On Equity 22% 20% 21% 21% 21% 20% 24% 28% 27%
Liquidity
Current Ratio 1.86 2.24 1.68 2.03 2.21 1.94 1.48 1.53 1.85
Quick Ratio 1.30 1.51 1.06 1.29 1.55 1.33 0.94 0.97 1.17
Leverage
Liabilities to Assets 0.39 0.33 0.37 0.17 0.20 0.46 0.55 0.59 0.57
Activity
Average collection period 65.74 69.67 67.58 166.84 66.51 63.43 64.97 65.95 64.02 Days
Average Payables Period 77.12 70.82 79.21 59.09 64.67 51.71 60.72 44.15 44.77 Days
Average Inventory Period 150.12 138.02 137.17 138.08 138.82 149.49 150.07 138.30 153.79 Days
Total Assets Turn Over 0.68 0.71 0.74 0.31 0.77 0.78 0.82 0.84 0.85
Working Capital 1.86 2.24 1.68 2.03 2.21 1.94 1.48 1.53 1.85
Operating Cycle 138.74 136.86 125.54 245.84 140.66 161.20 154.32 160.11 173.04 Days
Cash Cycle 138.74 136.86 125.54 245.84 140.66 161.20 154.32 160.11 173.04 Days

4. Write a financial analysis about Novozymes. Use the financial statement and make a comparison between the ratios for the company between the years 2006 and 2014
The income statement shows a profit of DKK 2525 million which is also higher than the previous year’s net profit of DKK 2201 million. Looking at the balance sheet the company has increased its assets. Both fixed and current assets get increment. Net assets have got total increase of DDK 1920 DKK million. There is decrease in retained earnings for the year. There is total of DKK 1342 increase in liabilities.

Liquidity ratios

Quick ratio indicates the ability of the company to pay its current liabilities. Quick ratio of the company for the year 2014 shows that the company has about DKK1.86 to pay off DKK1 liability. This shows a good position for the company. Company has excess of asset for its obligation. The overall position is good company has moderate level of cash available for payment. There is no over excesses capital stuck in cash and no opportunity for investment is loss. Comparing it to past years it seems that the company has been maintain good and steady quick ratio.

Current ratio indicates the company’s ability to pay its creditors, usually in 1 year period. This ratio is also favorable and in comparison to past years it indicates that there is steady trend in this ratio.(Peterson, n.d)

Leverage ratio

The liability to asset ratio shows the relative amount of liabilities that relates to the assets. This shows that about 40% of assets are financed by the liabilities. This can also compare with the common size balance sheet calculation which confirms this. By looking the trend from past years it can be seen that from year 2006 to 2008 the ratio was over 50% but now it is 40% which is a good sign. The leverage has been lowered and there is less financial risk…………..

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