Financial Ratio Analysis Performance Report Essay

3416 WordsAug 5, 201214 Pages
1.0 Executive Summary This report provides an analysis and compare of the current profitability, efficiency and financial stability of Premier Investments Ltd and David Jones Ltd over last 2 years. Methods of analysis include trend, horizontal and vertical analyses as well as ratios such as Gross Net profit margin, Inventory turnover and Current ratios. All calculations can be found in the appendices. Results of data analysed show that David Jones Ltd have better performance and is more stability than Premier Investments Ltd. In particular, Premier Investments Ltd’s profit had dropped almos half than the year before.The report finds the prospects of both companies in their current position are pretty positive. The major areas of…show more content…
Premier Investment’s Gross Profit Margin has increased slightly from 59.09% in 2010 to 59.51% in 2011. The increase is not huge, but the margin is pretty good, and it reflects that the company keeps the cost under control. On the other hand, the Gross Profit Margin for David Jones has decreased from 39.73% in 2010 to 39.11% in 2011. This decrease is not very huge, but the overall figure reflects not a very profitable condition. These margins are well below the profitability of Premier Investments. This means that David Jones has a relatively poor cost control. Net Profit Margin The Net Profit Margin is a more refined measure of profitability. Gross Margin reflects half of the costs, and does not include the effect of operating costs. However, net profit margin includes the operating costs, as well (Vance 2003). Premier Investments’ Net Profit Margin has decreased from 16.11% in 2010 to 9.54% in 2011. This is a significant decrease in profitability, since the net margin has decrease by over 5%. It reflects that the company is unable to control its operating expenses. David Jones Limited, on the other hand, had a net Profit Margin of 12.11% in 2010, which increased to 12.62% in 2011. The increase is not very huge, but the overall Net Profit Margin is
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