Revenue

Working capital efficiency

From the graph shown below, it is easy to understand the working capital liquidity of the PFL. Number of days in inventory on hand shows the efficiency of the company. Patties took 247 days in FY2008 and increased to 345 days (FY2012) to sell out their inventories, thus, PFL was more efficient in 2008 than 2012. Moreover, figures in days of sales in trade receivables show how company can convert their account receivables (credit sales) into cash. The fewer days of sales in trade receivables, the faster we receive payments from customers. The number of days to convert account receivables into cash decreased from FY2008 (281.62 days) to FY2010 (249 days) which then increased to 287 days in FY2012. PFL’s efficiency of working capital was going down, and we estimate it will keep going down in the future. Furthermore, the efficiency of the company can also be shown in payables turnover ratios, as the company takes longer day to pay its suppliers, the greater amount of free financing the firm is able to utilise to fund it working capital requirements. The number days of payables was increased from FY2008 to FY2012, so PFL took more free financing from its suppliers. It can also be meant that PFL is growing to the reason suppliers allow them to pay their purchases in longer time.

Liquidity

Both of current ratio and quick ratio can be used to measure the firm’s liquidity. Current ratio expresses assets as a percentage of current liabilities, because the higher current ratio shows more liquidity or cash resources to meet its short term liability. PFL had a good ability to pay its short term debt in FY2008, but it was decreasing until FY2011. After FY2011, the company’s current ratio went back up to 2.55, thus, we suggest that it will keep going well in the future due to the expectations of increases in current assets higher than the increases in current liabilities which brings up the current ratio.

Cash flow

Patties Foods showed increasing...