Cineplex is a
corporation who had developed to the company it is today because of is
successive years and failures. From analyzing and researching this company many
conclusions are drawn from their financial statements, ratio analysis and press
commentary. The current ratio is measure of the ability to pay short-term debt (Jerry
J.Weygandt 182). In 2015 Cineplex had $0.41 of current assets to every dollar
of current liabilities (“Cineplex 2016 Annual Report”). In 2016 it
increased to $0.45 of current assets to every dollar of current liabilities (“Cineplex
2016 Annual Report”). A slight increase of $0.04, they could
handle their currents assets better. The inventory turnover ratio measures the
number of times, on average, the amount of times inventory is sold (Jerry
J.Weygandt 304). In 2015, Cineplex sold inventory on average 6.54 times (“Cineplex
2016 Annual Report”). In comparison to 2016, they sold inventory
in average 4.38 times (“Cineplex 2016 Annual Report”). Inventory
was being sold faster on average because in 2016, they had more average
inventory on hand than in 2015. Since most of their inventory is food it makes
sense that is was sold more faster and more efficiently than in comparison to
previous years. The debt to total assets measures the percentage of the total
assets that is financed by creditors than by shareholder (Jerry J.Weygandt 780).
In 2015, 54.61% of the assets were financed by creditors and it increased to
56.49% in 2016 (“Cineplex 2016 Annual Report”). More than
50% of Cineplex’s assets are financed by creditors which is riskier than
financing provided by shareholder  (“Why the Fall at Cineplex Inc. Is Only
Getting Started”). This is why Shareholders equity decreased
from 15.69% to 9.08% from 2015 to 2016 respectively (“Cineplex 2016 Annual Report”). More money was
spent repaying creditors because they have claim over shareholders first.
Cineplex should consider to choose to finance by equity over debt because of
the decline is their shareholders profile. The interest coverage ratio
indicates a company’s ability to pay interest payments as they come due (Jerry
J.Weygandt 780). Cineplex covered interest charges 8.63 times in 2015 and 6.81 times in
2016 (“Cineplex
2016 Annual Report”). Although Cineplex’s debt to total assets is about
57%, they are still equipped to handle their interest payments in 2016 (“Cineplex
2016 Annual Report”). The profit margin measures the percentage of each
dollar of sales that results in net income (Jerry
J.Weygandt 245). In 2015, 9.81% of all expense were covered (“Cineplex 2016 Annual Report”). In 2016,
Cineplex only managed to cover only 9.08% (“Cineplex 2016 Annual Report”). In order in
increase this percentage, Cineplex needs to control is operating and
non-operating expenses. The return on equity is a ratio valuable to many
investors and shareholder (Jerry J.Weygandt 684). It is used to
evaluate how many dollars are earned for each dollar invested (Jerry
J.Weygandt 684). In 2015 return on equity was 15.68% and dropped to 9.08% in 2016 (“Cineplex
2016 Annual Report”). This may concern many investors of Cineplex. Since Cineplex’s
P/E of 36.6x is higher than its industry peers (33.4x), it means that investors
are paying more than they should for each dollar of their earnings(“Should You Sell Cineplex Inc (TSE:CGX) At This PE Ratio?”). The asset
turnover ratio measures how many dollars of sales are generated by each dollar
invested in assets (Jerry J.Weygandt 488). In 2015, for each dollar
invested in assets produced $0.83 in sales (“Cineplex 2016 Annual Report”). In 2016, for
each dollar invented in assets produced $0.86 in sales (“Cineplex 2016 Annual Report”). A slight
increase between the two years would not be a huge factor to say the company
was running more efficiently in 2016. Also, more than 50% of their expenses was
spent on other costs which included rent expense, theatre occupancy expenses,
other operating expenses, and general and administrative expenses (“Cineplex
2016 Annual Report”). Their revenue increased from $1,370,943 in 2015
to $1,478,326 in 2016 (“Cineplex 2016 Annual Report”). This is due to the
expansion of 3D, VIP, UltraAVX, and D-BOX offerings as well as the addition of
4DX in the current period (“Cineplex 2016 Annual Report”). The company
is able to utilize their borrowings efficiently in order to generate cash flow,
but its low liquidity raises concerns whether short term obligations can be met
in time and financing by debt for expenses could be challenging in the future
 (“Why the
Fall at Cineplex Inc. Is Only Getting Started”). As the economy starts to
change with online competitors such as Netflix, more people are finding other
alternatives and putting companies like Cineplex at risk.


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