Cash Flow to Fixed Charges Ratio (CFFCR)

Financial statement analysis (or financial analysis) is the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, by using different accounting tools and techniques.

Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of reformulated and adjusted financial statements. The first two steps are often dropped in practice, meaning that financial ratios are just calculated on the basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the foundation for evaluating and pricing credit risk and for doing fundamental company valuation. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.

1.      Liquidity analysis

Liquidity analysis aims at analyzing whether the firm has enough liquidity to meet its obligations when they should be paid.

2.      Solvency analysis

Solvency analysis aims at analyzing whether the firm is financed so that it is able to recover from a loss or a period of losses.

3.      Profitability analysis

Profitability analysis aims at analysing whether the firm can get maksimal profit from its activity.

4.      Cash Flow analysis

5.      Bankruptcy analysis

SOLVENCY ANALYSIS

            Solvency analysis aims at analyzing whether the firm is financed so that it is able to recover from a loss or a period of losses. Ratio of solvency analysis are:

1.  Financial Laverage (FLR)

2.  Total Debt to Total Capital Ratio (TDTCR)

3.  Total Debt to Equity Capital Ratio (TDECR)

4.  Long term Debt to Equity Capital Ratio (LDECR)

5.  Short term Debt to Total Debt Ratio (SDTDR)

6.  Cash Flow to Fixed Charges Ratio (CFFCR)

7.  Time Interest Earned Ratio (TIER)

Cash Flow to Fixed Charges Ratio (CFFCR)

      Cash flow to fix charges ratio also called cash flow adequacy ratio is cash generate from normal course of business that able to cover the fixed charges. A ratio that indicates a firm's ability to satisfy fixed financing expenses Net cash provided by operating activities and fix charges such as acquisition of fixed asset, addition to investment, payment of bank loan, interest expense, dividends paid. It is calculated as the following:

 

	2012 (Rp 000.000)	2011 (Rp 000.000)
Net Cash Provided by Operating Activities	1.454.476	538.280
Fix Charges: ·         Acquisition of Property, Plant, and equipment ·         Addition to investment property ·         Payment of Bank Loan ·         Interest paid ·         Dividends paid Total fix charges	561.610 41.597 1.589.378 30.305 448.366 2.671.254	416.623 - 440.080 22.422 473.939 1.353.064
Cash flow to fix charges ratio	0,54	0,40

Based on that calculation, it indicate that Cash Flow to Fix Charges Ratio of PT Timah Tbk for the year ended December 31, 2011 is 0,40. It means that the fixed charges of company are 0,40 times covered by its net cash provided by operating activities. And for the year ended December 31, 2012 the Cash Flow to Fix Charges Ratio of PT Timah Tbk is 0,54. It means that the fixed charges of company are 0,54 times covered by its net cash provided by operating activities.

The ratio of cash flow to fixed charges increased in 2012 by 0.14 times or 14%. Horizontally, this condition indicates that the long-term financial position of the company is good.

Company Profile

PT Timah (Persero) Tbk, through its subsidiaries, is engaged in mining, industry, trading, transportation, and service businesses in Indonesia. The company was founded in 1976 and is headquartered in Bangka, Indonesia. The company operates through Exploration, Coal Mining, Tin Mining, asphalt exploration and Construction segments. It is involved in the exploration, mining, processing, and marketing of tin products, such as Banka tin, Mentok tin, Banka low lead, Kundur tin, tin alloy, tin solder, and tin chemical products. The company also produces non tin products, including coal and cement; and offers workshop, construction and shipping dockyard, transportation, and mining consulting and research services. Its operational areas are in Bangka Belitung Province, Riau Province, South Kalimantan, Southwest Sulawesi, and Cilegon, Banten, Indonesia. PT Timah (Persero) Tbk exports its tin products to Japan, Korea, China, Singapore, the United Kingdom, the Netherlands, France, Spain, Italy, the United States, and Canada.