K + S Group Liquidity, Debt and Equity Ratios

Liquidity

Investopedia (2016) explains that Liquidity is a firm’s ability to balance its debts. 

KCQ: A balanced current liquidity should be higher than one, the higher the better (Investopedia 2016).

		2014	2013	2012	2011
Current Ratio	Current assets/current liabilities	2.02	1.83	2.10	2.04

K + S Group are reporting a Current Ratio of 2.02 for 2014 which is another positive indicator for recovery. Again, the 2013 figure reflects the upheaval in the Potash Market in July 2013.

The Debt/Equity Ratio is a comparison of a company’s debt relative to the total value of its stock (Investopedia 2016). 

Debt and Equity Ratios

According to Investopedia (2016) a high debt/equity ratio indicates that a company has been aggressive in acquiring debt to finance growth. Obviously there is a high level of risk with this kind of aggressive growth strategy. K + S Group’s Debt/Equity Ratio reflects the significant capital investment in the Legacy Project from 2013 onward. This aggressive growth is necessary to compete with the volume-over-price strategy of the Group’s major competitors.

		2014	2013	2012	2011
Debt/Equity Ratio	Debt/equity	406.8%	579.9%	76.4%	148.5%
Equity Ratio	Equity/total assets	4.0%	4.2%	5.3%	5.7%

According to Investopedia, ‘ROE is one of the most important metrics for evaluating management effectiveness’ (2016). Any company’s ROE should be considered in the context of its market competitors but for the purpose of this assignment, we will consider the ROE average for the entire market. Investopedia (2016) references this as averaging at around 14% in 2014.

We can see that, again, the K + S Group are performing well in 2014 and the 2013 ROE reflects a significant downturn when compared to previous years. However, the swift recovery points to effective management from the Group. The 2011 figure is particularly impressive. 

		2014	2013	2012	2011
Return on Equity (ROE)	Comprehensive Income/shareholders' equity	18.42%	7.98%	19.70%	23.67%