Financial Analysis Essay Example | Topics and Well Written Essays - 1000 words

Financial Analysis - Essay Example The current ratio shows the ability of a company to pay off its short term debt. It is calculated dividing current assets divided by current liabilities. Agnico Eagle had a current ratio in 2012 of 3.26. This ratio is very good because it is better than the industry average of 1.50. The quick ratio is another liquidity ratio that measures short term liquidity. The difference between the quick ratio and the current ratio is that inventory is subtracted from the numerator of the formula making the quick ratio a more strict liquidity ratio. The company had a quick ratio in 2012 of 2.02 which is better than the industry average of 0.70. The debt ratio of the firm in 2012 was 0.35. This ratio shows that the company is not too highly leveraged. In the future, the company could use additional debt to finance its growth. The debt to equity ratio of the firm was 0.54. This ratio measures a number of assets being provided by creditors for each dollar of assets being provided by stockholders. T he earnings per share (EPS) of the firm was $1.81. A good EPS result tends to have a positive effect on the market price per share. The dividend per share of the company was $1.02. The dividend payout ratio of the firm was 56.35% which implies that more than half its earnings were distributed to common shareholders. The net margin shows the absolute profitability of a firm. Agnico Eagle had a net margin in 2012 of 16.21%. Its net margin was extremely good considering that the industry average net margin that year was -25.60%.