Financial analysis

Running Head: Would You Invest In Hecla Mining (Symbol: Hl)?  Why Or Why Not?
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Would You Invest In Hecla Mining (Symbol: Hl)?  Why Or Why Not?

WOULD YOU INVEST IN HECLA MINING (SYMBOL: HL)?  WHY OR WHY NOT?

Executive Summary

Financial statements and ratio analysis for the past five years have been included in the concerned report for the assessment of the company’s financial health and its business performance for analysing the investment decisions. Furthermore, it was found that although the company had a better financial performance during 2015-2016, it saw a downfall in 2017 which gradually increased showing better investment prospects within the company.

Table of Contents
Introduction 4
Financial ratio analysis 4
Current ratio 4
Debt to equity ratio 5
Financial leverage ratio 7
Return on equity ratio 8
Financial statement analysis 9
Balance sheet analysis 10
Cash flow analysis 11
Conclusion 13
Reference List 14

Introduction
Financial ratio and financial statement analysis of Hecla mining has been conducted in the particular report to gain critical insights on the investment approaches for future investors in the company. Furthermore, a detailed analysis of the financial statements of Hecla mining has been provided along with the ratios for the past five years.

Financial ratio analysis

Ratio analysis refers to the relative magnitude of two sets of data or numbers incorporated from a firm’s financial statements (Shaikh, 2020). Furthermore, ratio analysis for Hecla mining is provided below mainly consisting of current ratio, debt-to-equity ratio, financial leverage ratio, and return on equity ratio to gain insight on the financial and debt situations of the concerned company.

Current ratio
Current ratio comes under the category of liquidity ratios which helps in the calculation and ability of the short-term debt obligations to be met by the companies (Easton et al. 2018). Current ratio of Hecla mining can be calculated hereby by dividing current assets by current liabilities.
The concerned values are obtained from the company’s financial statements,

Current ratios from 2015 to 2020

2020

2019

2018

2017

2016

2015

Selected Financial data (US$ in millions)

Current Assets

285

179

164

321

291

270

Current Liabilities

150

117

136

112

126

127

Liquidity Ratio

Current ratio

1.90

1.53

1.21

2.87

2.31

2.12

Benchmarks (Current ratio, industry)

Mining

2.33

1.66

1.76

2.05

1.82

2.14

Table 1: Current ratio analysis

(Source: Stockanalysis.Com, 2021)
2020’s ratio calculation,

.

Ratio conclusion: Hecla Mining’s current ratio calculation has emerged that the company deteriorated its performance in the recent years of 2018 to 2020. Furthermore, the current ratio has gradually increased from 1.21, 1.53 to 1.9 in 2018, 2019, and 2020 respectively. Although the current ratios are below the industry standard, the company gradually shows progress depicting stability in their liquidity position to be accountable for their short-term financial obligations. Hence, the investors should buy the concerned company’s shares in the future.

Debt to equity ratio
Debt to equity ratio refers to the proportions of shareholder’s equity and debt utilized for the financing of the company’s overall debts (Kamar, 2017). D/E ratio for Hecla mining can be calculated by dividing the total debt of the company by shareholder’s equity.

Debt-to-Equity ratios from 2015 to 2020

2020

2019

2018

2017

2016

2015

Selected Financial data (US$ in millions)

Debt due within one year

9.5

11.01

5.26

5.61

6.12

11.46

Long-term debt, excluding due within one year

524

523

541

508

507

509

Total Debt

533.5

534.01

546.26

513.61

513.12

520.46

Shareholders Equity attributable to Hecla Mining

1702

1692

1691

1461

1480

1339

Solvency Ratio

Debt to equity

0.31

0.32

0.32

0.35

0.35

0.39

Benchmarks (Debt to equity, Industry)

Mining (metals)

0.08

0.05

0.00

0.00

0.00

–

Table 2: Debt to equity ratio analysis

(Source: Stockanalysis.Com, 2021)
2020’s ratio calculation:

Ratio conclusion: From the above analysis, it has emerged that the debt to equity ratio for the concerned firm has remained to be more or less constant throughout the past five years.
Higher leverage ratios depict the higher risks to be faced by any particular firm’s shareholders due to the inadequate level of debt financing (Herawati & Fauzia, 2018). As the concerned ratio helps in analyzing the leverage used by a company, Hecla mining has a significantly closer ratio to its industry-standard showing a low D/E ratio which is beneficial for the shareholders. Therefore, it is advisable to invest in the Hecla mining company.

Financial leverage ratio
Leverage ratios of a particular firm help in analyzing the quantification of the amount of debt arising due to capitalization of the firm and its abilities to meet necessary financial obligations (Purnomo, 2018). Therefore, the concerned ratio helps the investors in the assessment of risks and the debt financing capabilities of the firms for further investment proposals.
Therefore, leverage ratio for Hecla mining can be calculated through the following equation,

Leverage ratios from 2015 to 2020

2020

2019

2018

2017

2016

2015

Selected Financial data (US$ in millions)

Total Debt

534

534

546

514

513

520

Shareholders Equity attributable to Hecla Mining

1702

1692

1691

1461

1480

1339

Leverage Ratio

Financial leverage

0.31

0.31

0.32

0.35

0.34

0.38

Benchmarks (Financial Leverage, industry)

Mining (metals)

–

–

–

–

–

–

Table 3: Financial leverage ratio analysis

(Source: Stockanalysis.Com, 2021)
Ratio conclusion: Table 3 depicts the financial leverage ratio calculation for Hecla mining company from 2015 to 2020. Leverage ratio helps in the assessment of the debt borrowing capacity of a firm for further increase in their profitability (Iqbal & Usman, 2018). Therefore, as per the calculation, it has emerged that the leverage ratio for the company gradually decreased showing the lack of profitable situations from their debts. Therefore, the company needs to finance their debts more concerning their equity values as the leverage ratio shows no significant change in the past years.

Return on equity ratio
Return on equity of a firm refers to the overall profitability of an organization concerning their equity of the concerned shareholders (Kamar, 2017). Hecla mining company’s return on equity can be calculated with the formula given below,

Return on Equity ratios from 2015 to 2020

2020

2019

2018

2017

2016

2015

Selected Financial data (US$ in millions)

Net Income

-16.79

-99.56

-26.56

-28.52

61.57

-86.57

Shareholders Equity attributable to Hecla Mining

1702

1692

1691

1461

1480

1339

Profitability Ratio

Return on equity

-9%

-5.8%

-1.5%

-1.9%

4%

-6%

Benchmarks (Financial Leverage, industry)

Mining (metals)

-103.1%

-120.9%

0%

0%

0%

0%

Table 4: Return on equity ratio analysis

(Source: Stockanalysis.Com, 2021)
Calculation of ROE for 2020,

ROE = -9%
Ratio conclusion: From the aforementioned table, it has emerged that ROE for the concerned company has been significantly better than its industry standard for the past years. As ROE helps in the profit generation of a company from investments of their stakeholders, Hecla mining has also emerged to finance its profits from the investments of its shareholders (Hidayat, 2017). Therefore, it is advisable for further investments in the concerned company.

Financial statement analysis
Analysis of financial statements is the procedure of deep evaluation and analysis of the statement of finance. This analysis is done for the purpose of the decision-making process and finalizing investment proposals. External shareholders who are very interested in investment within shares of the company are eager to know the financial health of company (Hasan et al. 2020). In addition, these are being used for knowing the intrinsic value of the business as well as the annual performance of the business.

Balance sheet analysis

Figure 1: Balance sheet Hecla Mining (2016-2021)

(Source: Hecla Mining, 2021)
Figure 1 displays the highlights of the balance sheet of Hecla mining for financial years 2016 till 2021. A statement of a balance sheet is a financial statement that displays the equity of shareholders, current liabilities, and current assets. Statement of the balance sheet also provides the rate of return on its dividends and also on its equity shares. This is a tool of financial statements which also provides a snapshot of the assets as well as its liability. Furthermore, current assets represent all the underlying assets of the company which are expected to be consumed, exhausted, and sold in the procedure of day-to-day operations of the business. During the financial year 2016, the current assets of Hecla stand at 291,091, while the figure jumps to 321236 during 2017. Thus there was a significant increase in current assets during 2017. Furthermore, during 2018, current assets again fell to 164150, it can be analyzed that the trends of current assets are in a zig-zag path as it is both rising as well as falling. However, during the last two financial years, Hecla mining witnessed an upward trend. In 2019, ratio increased to 179124, and in 2020, this ratio furthermore jumped to 284,681.
Working capital is the difference between the current assets of a company (accounts receivable, cash) and the current liabilities of the company (such as bills payable). Therefore positive values of working capital indicate that the company can invest additional funds and also invests in growth as well as future activities. During the financial year of 2020, the working capital of Hecla stands at 164,866. During the financial year of 2017, these figures of working capital stand at 109106. Thus during 2016 and 2017, working capital witnessed an upward trend although, during 2018, these figures drastically dropped to 27.956. Furthermore, during 2019 and 2020, this ratio witnessed an upward trend and the figures stood at 62,150 and 134896. Total assets refer to the summation of amounts of assets being owned by any organization. Assets are an object of economic value which is being expanded over a period of time for yielding advantages to its owner. During the period of 2016 and 2017, the value of total assets for Hecla mining stood at 2371677 and 2345158 respectively. However, after 2017, these values of total assets witnessed an upsurge and continue to rise.

Cash flow analysis

Figure 2: Cash flow statement (2016-2021)

(Source: Hecla Mining, 2021)
Statement of cash flow evaluates the inflow as well as the outflow of cash in any statements of finance. This summarizes deeply the figures of cash equivalent leaving and entering any company. Statement of cash flow evaluates how well a company manages its position of cash. Cash inflow from its operating activities relates to the number of revenue organizations are able to yield from their regular activities. During 2016, the inflow of cash from operating activity stood at 225328. Since 2016 Hecla mining had witnessed a constant decrease in the inflow of cash. Hecla mining witnessed its lowest inflow of cash from operating activity during 2018 at 94,221. The inflow of cash from operating activity refers to how much revenue has been yielded through activities related to the sale or purchase of assets. Therefore for Hecla mining, cash flow on basis of investing activity is negative during all financial years. It indicates the poor performance of the company, this might occur also because of the vast amount of revenue being invested heavily on developments as well as research. Henceforth from the cash flow statement of five years, Hecla mining’s best performance is analyzed during 2020 at (92,901). On the other hand, it is analyzed that Hecla mining witnessed its worst performance during 2018 at (236,547).
The inflow of cash from the financial statement displays the net inflow of cash from activities related to finance. These activities relate to transactions arising out of dividends, equity, and debt. It can be witnessed that except for 2019, Hecla mining had witnessed negative cash flow in all financial years. Negative cash flow from financing indicates that Hecla mining is paying out dividends to its shareholders.

Income statement analysis (200)

Figure 3: Income statement analysis from 2016 to 2020

(Source: Hecla mining, 2021)
An income statement is a statement of finance that displays the expense as well as income of the company. This statement displays whether the company is making any loss as well as profit for a given interval of time. This statement along with a statement of cash flow and balance sheet assists in analyzing the financial status and health of a company. Selling of any product refers to the selling of services or goods in return for revenue. Moreover, whenever final customers feel that the product would fulfill their desires and wants, they would purchase the products. Henceforth the number of units of products being sold assists in determining the sales of products. During financial year2016, sales of products stood at 645,957. During 2017 and 2018, Hecla mining witnessed a downward trend in these sales as sales stood at 577,775 and 567,137. However, during 2019 and 2020, this downward trend reversed to an upward trend as Hecla mining witnessed sales at 637266 and 691873. Gross profit refers to the net profit which a company makes after the reduction of costs associated with providing service. During 2016, company recorded its highest gross profit at 191.506.

Conclusion
In this report, a detailed analysis of financial statements had been done and analyzed in detail. Detailed analysis of key statements of finance like cash flow statements, balance sheet, and statement of profit and loss had been done in detail. The balance sheet states that the financial health of the company is good and is up to the mark. Statement of cash flow statement displays that the inflow of cash is enough and the company pays timely dividends to its shareholders and debenture holders. The income statement displays that the income of the organization is absolutely steady. Therefore it can be concluded to invest in Hecla mining.

Reference List
Easton, P. D., McAnally, M. L., Sommers, G. A., & Zhang, X. J. (2018). Financial statement analysis & valuation. Boston, MA: Cambridge Publishers. Retrieved from: https://www.fau.edu/graduate/faculty-and-staff/programs-committee/docs/02202019/NCP-ACG5176.pdf Retrieved on 27 May 2021
Hasan, M. M., & Taylor, G. (2020). Financial statement comparability and bank risk-taking. Journal of Contemporary Accounting & Economics, 16(3), 100206. Retrieved from” Financial statement comparability and bank risk-taking – ScienceDirect Retrieved on 27 May 2021
Hecla mining, (2021) Financial statements Retrieved from: hecla-mining.com Retrieved on 27 May 2021
Herawati, A., &Fauzia, F. I. (2018). The Effect of Current Ratio, Debt to Equity Ratio and Return on Asset on Dividend Payout Ratio in Sub-sector Automotive and Component Listed in Indonesia Stock Exchange in Period 2012–2016. KnE Social Sciences. Retrieved from:https://www.knepublishing.com/index.php/Kne-Social/article/view/3450/7301 Retrieved on 27 May 2021
Hidayat, D. W. W. (2017). The Influence of Size, Return on Equity, and Leverage on the disclosure of the Corporate Social Responsibility (CSR) in Manufacturing Companies. Retrieved from: http://repository.ubharajaya.ac.id/5861/1/The%20Influence%20of%20Size%2C%20Return%20on%20Equity%2C%20and%20Leverage%20on%20the%20disclosure.pdf Retrieved on 27 May 2021
Igan, D., Kabundi, A., De Simone, F. N., & Tamirisa, N. (2017). Monetary policy and balance sheets. Journal of Policy Modeling, 39(1), 169-184. Retrieved from” https://www.econrsa.org/system/files/publications/working_papers/working_paper_364.pdf Retrieved on 27 May 2021
Iqbal, U., &Usman, M. (2018). Impact of Financial Leverage on Firm Performance: Textile Composite Companies of Pakistan. SEISENSE Journal of Management, 1(2), 70-78. Retrieved from: https://journal.seisense.com/index.php/jom/article/download/13/15 Retrieved on 27 May 2021
Kamar, K. (2017). Analysis of the effect of return on equity (ROE) and debt to equity ratio (DER) on stock price on cement industry listed in Indonesia stock exchange (IDX) in the year of 2011-2015. IOSR Journal of and Management, 19(05), 66-76. Retrieved from:https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1078.8548&rep=rep1&type=pdf Retrieved on 27 May 2021
Linares-Mustarós, S., Coenders, G., & Vives-Mestres, M. (2018). Financial performance and distress profiles. From classification according to financial ratios to compositional classification. Advances in Accounting, 40, 1-10. Retrieved from” https://e-tarjome.com/storage/panel/fileuploads/2019-06-11/1560245382_E11288-e-tarjome.pdf Retrieved on 27 May 2021
Linares-Mustarós, S., Coenders, G., & Vives-Mestres, M. (2018). Financial performance and distress profiles. From classification according to financial ratios to compositional classification. Advances in Accounting, 40, 1-10. https://e- Retrieved from” tarjome.com/storage/panel/fileuploads/2019-06-11/1560245382_E11288-e-tarjome.pdf Retrieved on 27 May 2021
Purnomo, A. (2018). Influence of The Ratio of Profit Margin, Financial Leverage Ratio, Current Ratio, Quick Ratio Against The Conditions and Financial Distress. Indonesian Journal of , Accounting and Management, 1(1). Retrieved from: https://stei.ac.id/ojsstei/index.php/ijbam/article/download/218/138 Retrieved on 27 May 2021
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