Financial Analysis Of Firstgroup Plc, A Leading Land Transport Corporation
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This financial analysis report is carried out for the First Group Plc, a leading land transport corporation, so as to determine whether or not the client should invest in the company. For this purpose, some ratios of FirstGroup Plc were reviewed for a 5 year period and compared against its competitors: Stagecoach Group Plc and the Go-ahead Group Plc. In some relevant places, the ratios were also compared with the industry benchmark. However, certain data for 2014 are not available so that up to 2013 statistics were reviewed in that situation. Conclusions are drawn from the above-mentioned financial analysis and assisted the client to make important decision of investing in First Group Plc. Moreover, these financial…show more content… Moreover, it enables to ascertain value at the start-up stage when a new company may not yielding proceeds in the marketplace. Hence, it appears to be an important financial ratio for the investors in the business environment. However, while comparing the investment of different companies it is noticed that stocks with higher ROE indicate greater prospects of proceeds derived from each dollar of equity. In other words, higher ROE is a positive sign for the financial condition of the company (Biddle et al., 2009).
First Group Plc’s ROE ratio shows drastic decline in the previous year 2014 to 5.30 from 6.02. In 2012, it was recorded 26.76 showing best financial performance in the business environment. Moreover, it means that in this year there were maximum opportunities to maximize the profits from investment and lead to high productivity (For example London 2012 games revenues). It means that previously company was earning higher profits from the investment which declined rapidly indicating poor financial conditions of First group Plc in the business environment. Thus, First group Plc needs to improve its ROE ratio through adopting more effective business strategies and managing other operations efficiently to ensure high profitability.
Return on Capital Employed (ROCE)
ROCE ratio shows how much profit each dollar of