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Financial Ratios: 7-Eleven vs. MyNews

Both 7-Eleven and MyNews have current ratios below 1, indicating challenges in covering short-term liabilities, with 7-Eleven slightly ahead at 0.88. MyNews has a higher gross profit margin (37.56%) compared to 7-Eleven (30.86%), but 7-Eleven outperforms in net profit margin (1.32% vs. 1.08%) and returns on capital employed (10.17% vs. 6.33%) and assets (1.57% vs. 1.36%), suggesting better operational efficiency. Overall, while MyNews excels in product profitability, 7-Eleven demonstrates superior management of expenses and asset utilization.

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Aqil Haziq Hairulizam
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24 views2 pages

Financial Ratios: 7-Eleven vs. MyNews

Both 7-Eleven and MyNews have current ratios below 1, indicating challenges in covering short-term liabilities, with 7-Eleven slightly ahead at 0.88. MyNews has a higher gross profit margin (37.56%) compared to 7-Eleven (30.86%), but 7-Eleven outperforms in net profit margin (1.32% vs. 1.08%) and returns on capital employed (10.17% vs. 6.33%) and assets (1.57% vs. 1.36%), suggesting better operational efficiency. Overall, while MyNews excels in product profitability, 7-Eleven demonstrates superior management of expenses and asset utilization.

Uploaded by

Aqil Haziq Hairulizam
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Current Ratio

Both companies have a current ratio below 1. This indicates that, at the time these figures
were reported, neither company could cover its short-term liabilities using its current assets
alone.

7-Eleven (0.88) is in a slightly better position than MyNews (0.84) according to this metric,
but both are in a similar situation. For retail businesses like convenience stores, a ratio
slightly below 1 can be normal due to fast-moving inventory and cash flow.

Quick Ratio

The quick ratios for both companies are significantly lower than their current ratios, which
highlights their heavy reliance on inventory. This is typical for retail businesses like
convenience stores.

A quick ratio of 0.38 for MyNews means it only has 0.38 in highly liquid assets for every
dollar of current liabilities.

7-Eleven's quick ratio of 0.48 is higher, indicating it has a better ability to cover its short-term
debts without needing to sell its stock of goods.

Gross Profit Margin

MyNews has a significantly higher Gross Profit Margin (37.56%) compared to 7-Eleven
(30.86%).

This means that for every dollar of sales, MyNews retains 37.56 cents to cover its other
operating expenses, while 7-Eleven retains only 30.86 cents.

This could suggest that MyNews has a better product mix (selling more high-margin items), a
more effective pricing strategy, or more favourable purchasing terms with its suppliers

Net Profit Margin

Despite its lower gross margin, 7-Eleven has a higher Net Profit Margin (1.32%) than
MyNews (1.08%).

This is a very important finding. It reveals that while MyNews is more profitable on the
products it sells (higher gross margin), its other operating expenses (e.g., rent, salaries,
marketing, administration) are proportionally higher and consume a larger portion of its
gross profit.

7-Eleven, on the other hand, is more efficient at managing its overall operations. Its larger
scale (indicated by much higher sales figures) likely allows it to benefit from economies of
scale, reducing its per-dollar operating costs and leading to better bottom-line profitability.
ROCE

7-Eleven has a substantially higher ROCE (10.17%) than MyNews (6.33%).

This is a significant difference and indicates that 7-Eleven's management is much more
efficient at using its long-term financing (both debt and equity) to generate profits.

For every Ringgit of capital invested, 7-Eleven generates 10.17 cents in profit before interest
and tax, while MyNews generates only 6.33 cents. This points to a more effective operational
model at 7-Eleven.

ROA

7-Eleven also has a higher ROA (1.57%) compared to MyNews (1.36%).

This reinforces the finding from ROCE. It shows that 7-Eleven is more effective at deploying
its entire asset base (cash, inventory, stores, equipment) to generate bottom-line profit.

For every Ringgit of assets it owns, 7-Eleven generates 1.57 cents in net profit, slightly more
than the 1.36 cents generated by MyNews.

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