Financial Ratios Analysis of Metlife Inc.
This paper investigates the financial performance of the public company Metlife Inc. from the healthcare sector (“SEC EDGAR Metlife Inc 10-K,”). The financial statements covered in this paper are from 2011 till 2015. In this research, the ratios are compared across time and comments are left below. All the values are obtained from the annual 10-K reports from the SEC EDGAR database.
Profitability Ratio.
Computed by dividing Net Income by Revenues
2011-12
2012-12
2013-12
2014-12
2015-12
Profit Margin
10%
2%
5%
9%
8%
During the last 5 years, the profit margin has been volatile with the lowest in 2012 and highest in 2011, during recent years it has shown signs of growth.
Financial Leverage.
Computed by dividing EBIT by (EBIT – Interest Expense)
2011-12
2012-12
2013-12
2014-12
2015-12
Degree of Financial Leverage
1.12
180.25
1.46
1.16
1.19
The largest spike in DFL (degree of financial leverage) is observed in 2012, this is mainly due to low EBIT, explained by incurred large investments in 2012.
Liquidity Ratios
In this section, we investigate two ratios: Current Ratio and Quick Ratio. The CR is calculated by dividing Current Assets by Current Liabilities. The QR is computed by dividing (cash + short-term investments + receivables) by Current Liabilities.
2011-12
2012-12
2013-12
2014-12
2015-12
Current Ratio
15
157
43
108
128
Qiick Ratio
79
403
287
534
388
The large numbers of the CR and QR in recent years can be attributed to the fact that the size of current assets is disproportionate to the size of current liabilities. This is typical for the insurance company, which has sizable current assets and long-term liabilities and relatively low current liabilities.
Asset Utilization Ratio
2011-12
2012-12
2013-12
2014-12
2015-12
Asset Utilization Ratio
0.09
0.08
0.08
0.08
0.08
The Asset Utilization Ratio is measured by dividing Revenues by Total Assets. It measures how much company earns by using its assets. The ratios is quite small, which is typical for financial services company operating in the healthcare sector.
Working Capital
2011-12
2012-12
2013-12
2014-12
2015-12
Working Capital Turnover
1.9
2.1
1.8
2.0
6.2
The working capital turnover is measured by dividing the working capital (current assets – current liabilities) by total revenues. As we can see over the last 5 years, the Metlife Inc has improved its effectiveness by increasing the working capital turnover, especially observable in 2015.
References:
SEC EDGAR Metlife Inc 10-K. Retrieved December 15, 2016, from Securities and Exchange …
