Finance

KUWAIT CEMENT COMPANY (K.C.C)

Ticker KCEM, Stock Number503(Short-term solvency or liquidity ratios4)  (  3Analysis of Short-term solvency or liquidity ratiosN4 Current Ratio  The liquidity position reduced from 2.95 to 1.56 in these two consecutive years because of a 30 reduction in current asset and a simultaneous 30 increase in current liability over the same period. This is not a healthy sign though the ratio is still above the 1.33 thumbnail benchmark for manufacturing industries.

Quick Ratio Has reduced in similar proportion as current ratio. However as inventory breakup not available on website, not able to comment much on this.

Cash Ratio  0.34 times for the first year indicating that cash is available to the extent of 35 of the company s total current liabilities. Again cash breakup not available for 2008 on website, hence comparison not possible.

NWC to Total Assets  Fell from 0.266 to 0.154 in the consecutive years. As seen from all these ratios, the liquidity position of the company started showing signs of drastic worsening which is a negative thing for the company.

Interval Measure An indication to measure the approximate number of days the company can operate simply on the cash it currently has on hand. Has reduced from 994 to 590 days. Even though this ratio has reduced drastically, 590 days of safe liquidity is a good indicator.MPPPPP

0Long-term solvency or financial leverage ratios11
Analysis of Long-term solvency or financial leverage ratios Total Debt Ratio reduced from 0.87 to 0.77 in two consecutive years. This implies that the debt component in funding the total assets of the company reduced by this extent over these two years.

Debt Equity increased from 1.3 to 1.92 in the two consecutive years indicating that leverage of the company has increased. This further implies that risk of investing in this company has increased over these two years.

Equity Multiplier The higher theratiois, the more thecompanyis relying ondebttofinanceits assetbase. This ratio is directly proportional to any change in the debt equity ratio. In this case the leverage has increased over the two consecutive years.

Long-term debt ratio increased from 0.26 to 0.73 indicating that in the second year 73 of total liabilities was financed by long term debt as against only 26 in the previous year. This indicates that the company substituted in short term debts with more long term debts in the second year.