An Investigation Into the Financial Performance of Dickie Dirt Ltd.

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An investigation into the financial performance of Dickie Dirt Ltd. The report also includes accounting ratio analysis of the company over the past three years.

1. Terms of Reference

Exodus Venture Capital Ltd has requested this report to disseminate information with the aid of accounting ratio analysis Dickie Dirt's financial performance over the past three years. The author was requested to ascertain the company's financial state identifying any limitations and assumptions made. The submission date is for the fifteenth of December 2003.

2. Procedure.

The author, in order to complete the report studied several texts with regards to financial management. The author also researched many useful websites and journals with regards
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For 2000 Dickie Dirt showed a gross profit margin of 66%. This rose steadily to 74% in 2001 and 81% in 2003. This high gross profit margin indicates that the business in question can make a reasonable profit on sales, and showing by the trend over the past three years, Dickie Dirt seems to earn considerable profit on sales alone. Net profit margin according to Solomon, E (1997) indicates how much profit a company makes for every £1 it generates in revenue. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better. For 2000 Dickie Dirt's net profit margin was 9% with it then a drop of one point to 8% in 2001. However in 2003 it rose two percent from the previous year indicating that the company is increasing profitability. Dickie Dirt Ltd has therefore increased both gross profit margin and net profit margin steadily in the past three years. This reflects positively on the companies' profitability ratios.

According to Pizzey, A (1998) the return on capital employed ratio (ROCE) tells us how much profit we earn from the investments the shareholders have made in their company. The resulting ratio represents the efficiency with which capital is being utilised to generate revenue. In 2001 Dickie Dirt's Ltd recorded ROCE at 8.28% with it falling slightly to 7.47% in 2002. This indicates that profit earned from
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