4.1. 2012-2017Q1 Consolidated Financial Analysis – MediaTek & Subsidiaries

Changes that exceed 20% in the past two years and explanation for those changes:

1. Average inventory turnover increased by 20%: Mainly due to increase in operating costs associated with sales.
2. Total assets turnover increased by 26%: Mainly due to increase in sales driven by sales growth.
3. Net margin decreased by 28%: Mainly due to decrease in gross margin.
4. Cash flow reinvestment ratio increased: Mainly due to increase in net cash provided by operating activities and decrease in cash dividend.
5. Operating leverage increased by 47%: Mainly due to increase in net sales.

4.2. 2012-2016 Financial Analysis – Parent Company

Changes that exceed 20% in the past two years and explanation for those changes:

1. Quick ratio decreased by 25%: Mainly due to increase in inventory and current liabilities.
2. Times interest earned decreased by 20%: Mainly due to decrease in pre-tax income.
3. Average inventory turnover increased by 37%, average payment turnover increased by 38% and average inventory turnover days decreased by 27%: Mainly due to increase in operating costs associated with sales.
4. Total assets turnover increased by 25%: Mainly due to increase in sales driven by sales growth.
5. Net margin decreased by 25%: Mainly due to decrease in gross margin.
6. Cash flow ratio increased by 26% and cash flow reinvestment ratio increased by 87%: Mainly due to increased in net cash provided by operating activities and decrease in cash dividend.
7. Operating leverage increased by 2055% and financial leverage increased by 84%: Mainly due to decrease in operating income.

Glossary:

1. Capital Structure Analysis:

(1). Debt ratio = Total liabilities / Total assets

(2). Long-term fund to property, plant and equipment ratio = (Shareholders’ equity + non-current liabilities) / Net property, plant and equipment

2. Liquidity Analysis:

(1). Current ratio = Current assets / Current liabilities

(2). Quick ratio = (Current assets – inventories – prepaid expenses) / Current liabilities

(3). Times interest earned = Earnings before interest and taxes / Interest expenses

3. Operating Performance Analysis:

(1). Average collection turnover = Net sales / Average trade receivables

(2). Days sales outstanding = 365 / Average collection turnover

(3). Average inventory turnover = Operating costs / Average inventory

(4). Average payment turnover = operating costs / Average trade payables

(5). Average inventory turnover days = 365 / Average inventory turnover

(6). Property, plant and equipment turnover = Net sales / Average property, plant and equipment

(7). Total assets turnover = Net sales / total assets

4. Profitability Analysis:

(1). Return on total assets = [Net income + Interest expenses x (1 – tax rate)] / Average total assets

(2). Return on equity attributable to shareholders of the parent = Net income attributable to shareholders of the parent / Average equity attributable to shareholders of the parent

(3). Net margin = Net income / Net sales

(4). Earnings per share = (Net income attributable to shareholders of the parent – preferred stock dividend) / Weighted average number of shares outstanding

5. Cash Flow:

(1). Cash flow ratio = Net cash provided by operating activities / Current Liabilities

(2). Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividend

(3). Cash flow reinvestment ratio = (Cash provided by operating activities – cash dividends) / (Gross property, plant and equipment + long-term investments + other noncurrent assets + working capital)

6. Leverage:

(1). Operating leverage = (Net sales – variable cost) / Operating income

(2). Financial leverage = Operating income / (Operating income – interest expenses)