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Professor’s Name

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Alibaba Group Financial statement

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Ratio Analysis

Liquidity Ratios Formula 2014/2015 Rate 2016/2017 Rate

{Current Assets/

Current Ratio Current Liabilities} 142109/39672 3.58 182516/ 93771 1.95

{(Net Account

Receivable + Cash {(21374 +

Acid Test (quick) +Short-term Investment) {(11163+108193+1 143736 +7065)/

Ratio / (Current Liabilities)} 7806)/ 39672} 3.46 93771} 1.84

Account {Net Credit Sales/ (158273/

Receivable Average Net Accounts {76204/ (11,738+150801)/

Turnover Receivable} (16006+11163)/2} 11.65 2} 9.56

{Cost of sales/ Average {23834/ 59483/

Inventory turnover Inventory} (12029+17806)/2} 2.99 (8878+7065/2) 7.46

Profitability Ratios

{Net Income / Net

Profit margin Sales} 24261/23135 1.05 43675/48055 0.91

{158273/

{Net Sales / Average {76204/(111549+2 (364450+506812/

Asset Turnover Total Assets} 55434)/2} 0.42 2)} 0.05

{71460/

Net Income/ Average {24261/(111549+2 (364450+506812/

Return on Asset Total Assets} 55434)/2} 0.13 2)} 0.33

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Return on common {Dividends/ Average

stockholders Common

equities Stockholders’ Equity 2500/24149 2573/43675 0.06

{Dividends/ Weighted

Earnings per Shares Average Common

(EPS) Shares Outstanding} 2500/2337 0.10 2573/2493 1.03

{Market Price per

Price-Earnings (P- Share/ Earnings Per

E) Ratio Share} 9.7/10.33 0.94 27.89/ 29.07 0.96

{Cash Dividends

declared on common

Payout ratio stock/ Net Income} 24149/23076 1.05 43675/ 71460 0.61

Solvency Ratios

Debt to assets {Total Liabilities/ Total

ratio Assets 109995/255434 0.43 228013/ 506812 0.45

{Net Income + Interest

Time interest Expense + Income tax {(24261+2750+641 {(71460+2671+1

earned Expense/ Interest Expense) 6)/ 2750} 12.16 3776)/ 2671} 32.91
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1. Summary of the company

Alibaba Group Company was incorporated in 1999 with the aim of sharing a believed

that internet would offer everyone equal chance through enabling small businesses to leverage

technology and innovation to grow and compete more effectively in both local and international

market ("Alibaba Group.", N.p). Since launching, it has substantially facilitated small Chinese

exporters, entrepreneurs and manufacturers to sell globally hence making the company to

become an international leader in mobile and online commerce. Currently, the company, as well

as its subsidiaries, runs the biggest retail and wholesale business in cloud computing and online

marketplaces, entertainment, digital media, innovation initiatives and others. The Chief

Executive Officer of Alibaba, Mr. Ma, owns around 7.8% of the shares in Alibaba as well as

46% of the shares of the Alipay electronic payment affiliate (Graphics, WSJ.com. N.p).

2. Financial Ratio Analysis

Notably, financial ratios greatly help a company to evaluate the overall performance of their

investment that is vital in establishing the future direction of the company. It is therefore

imperative that ratios are computed to use them in monitoring the performance of various

portfolios of the company.

a. Accordingly, Alibaba’s current ratio significantly fell from 3.58 in FY2014/2015 to 1.95

in the FY2016/2017 indicating that the company’s ability to meets it short-term

obligations was becoming low ("Balance Sheet For Alibaba Group Holding Ltd ADR

(BABA) From Morningstar.Com.", N.p). However, the ratio remains good given that the

ratio still more than one that is acceptable.

b. The quick ratio fell from 3.46 in FY2014/2015 to 1.84 in FY206/2017 signifying that the

dollar amount available to the company was decreasing thus could be faced with
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financial challenges in the operation of the daily activities ("Balance Sheet For Alibaba

Group Holding Ltd ADR (BABA) From Morningstar.Com.", N.p).

c. The amount of receivable turnover for Alibaba.com fell from 11.65 to 9.56 during the

FY2014/2015 and FY2016/2017 is indicating that the more customers were currently

paying cash to the company than taking goods on credit terms ("Balance Sheet For

Alibaba Group Holding Ltd ADR (BABA) From Morningstar.Com.", N.p).

d. Alibaba.com inventory turnover ratio rose from 2.99 to 7.46 during the FY2014/2015

and FY2016/2017 demonstrating that the company was generally making a more sales in

the current financial year than in the previous period and thus generating more profit

margins for the company ("Balance Sheet For Alibaba Group Holding Ltd ADR

(BABA) From Morningstar.Com.", N.p).

e. The profit margin fell from 1.05 in the FY2014/2015 to 0.91 in the FY2016/2017

signifying that the company was directing more finances to capital venture ("Balance

Sheet For Alibaba Group Holding Ltd ADR (BABA) From Morningstar.Com.", N.p).

f. The asset turnover ratio fell significantly from 0.42 during the FY2014/2015 to 0.05 in

the FY2016/2017 depicting that the performance of Alibaba.com was substantially

decreasing in the market, therefore, affecting the overall growth of the company

("Balance Sheet For Alibaba Group Holding Ltd ADR (BABA) From

Morningstar.Com.", N.p).

g. Alibaba’s return on common stockholders equities fell from 0.10 during the

FY2014/2015 to 0.06 in the FY2016/2017 showing that the value of common stock in

the market was reducing thus affecting negatively the share prices of the company
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("Balance Sheet For Alibaba Group Holding Ltd ADR (BABA) From

Morningstar.Com.", N.p).

h. The earning per shares (EPS) of Alibaba greatly rose from 0.10 to 1.03 during the

FY2014/2015 and FY2016/2017 is indicating that there was an increased in the value of

shareholders in the company ("Balance Sheet For Alibaba Group Holding Ltd ADR

(BABA) From Morningstar.Com.", N.p).

i. Alibaba.com Price-Earnings (P-E) ratio increased from 0.94 during the FY2014 to 0.96

in the FY2016/2017 showing that there was an increased in the overall performance of

the company in the marketplace ("Balance Sheet For Alibaba Group Holding Ltd ADR

(BABA) From Morningstar.Com.", N.p).

j. The ratio of debt to assets of the company rose from 0.43 in the FY2014/2015 to 0.45

during the FY2016/2017 indicating that the company was using more borrowed capital

than their internally generated resources ("Balance Sheet For Alibaba Group Holding

Ltd ADR (BABA) From Morningstar.Com.", N.p).

k. The ratio of time interest earned of the company rose from 12.16 during the

FY2014/2015 to 32.91 in the FY2016/2017 signifying that the burden of taxes for the

company was substantially reduced in the current period as compared with the previous

financial year.

3. Recent company news

Recently, Alibaba Group Ltd indicated that they had made total sales of around $25.3

billion from its five technologies that operate 24 hours through Alipay payment platform. This

shows that there was an upsurge of 39% relative to 2016 ("5 Technologies That Were Key to

Alibaba Clocking $25.3 B GMV in 24 Hours", N.p). However, the aggregate mobile gross
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merchandise volume that was established through Alipay transacted 90% of the aggregate gross

merchandise volume. Accordingly, this achievement by Alibaba was linked with their system's

capability to control the spike of more than 325,000 requests per seconds during high season

emanating from the constant stress test ("5 Technologies That Were Key to Alibaba Clocking

$25.3 B GMV in 24 Hours", N.p).

4. Company Strengths

The brand image of Alibaba.com well known in the market and that it involves operates

as an intermediary that help linked consumer-to-consumer, business-to-business e-commerce and

business-to-consumer. The overall financial health of Alibaba.com as indicated above shows that

there is an overall growth in the value of the shareholders of around 0.33.

5. Threats & Risk factor

There is general rise of competition in the market from JD.com and Tencent as well as Amazon

and eBay. Moreover, the economic stability of Chinese would greatly determine the success of

the Alibaba business performance in the future (Bhasin & Hitesh., N.p). Imperatively, the

company has will not significantly depend on the economic performance of China since it has

established itself internationally and hence resulting in little or no effect on the local setting.

6. Recommendation to Buy or Not to Buy

From the above ratio analysis, it is clear that the financial health of Alibaba Company

remains good. This is because the rate of return of asset was increasing from 0.13 to 0.33 the

FY2014/2015 and FY2016/2017 respectively ("Cash Flow For Alibaba Group Holding Ltd ADR

(BABA) From Morningstar.Com.", N.p). Therefore, it is recommended that investors who want

to buy the share of the company should proceed and make the purchased.
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Work cited

Graphics, WSJ.com. "What Is Alibaba?." 2017, retrieved on November 15, 2017, from

http://projects.wsj.com/alibaba/.

"5 Technologies That Were Key to Alibaba Clocking $25.3 B GMV In 24

Hours." Yourstory.Com, 2017, retrieved on November 15, 2017, from

https://yourstory.com/2017/11/alibaba-global-shopping-technologies/

"Cash Flow For Alibaba Group Holding Ltd ADR (BABA) From

Morningstar.Com." Financials.Morningstar.Com, 2017, retrieved on November 15, 2017, from

http://financials.morningstar.com/cash-flow/cf.html?t=BABA&region=usa&culture=en-US.

"Balance Sheet For Alibaba Group Holding Ltd ADR (BABA) From

Morningstar.Com." Financials.Morningstar.Com, 2017,

http://financials.morningstar.com/balance-sheet/bs.html?t=BABA&region=usa&culture=en-US

Bhasin, Hitesh. "SWOT Analysis Of Alibaba - Alibaba.Com SWOT

Analysis." Marketing91, 2017, https://www.marketing91.com/swot-analysis-alibaba/.

"Alibaba Group." Alibabagroup.Com, 2016, retrieved on November 15, 2017, from

http://www.alibabagroup.com/en/about/history.