Introduction. The Aim Of This Report Is To Analyse The

1283 WordsApr 7, 20176 Pages
Introduction The aim of this report is to analyse the financial position of Hillside Engineering – organisation presented in the case study and evaluate the proposed investment in upgrading its production facilities. It will present and use an appropriate frameworks which will examine the alternative strategic options that organisation could consider to secure its future position. Finally, it will advise Hillside on the importance of mission, values and objectives in defining and communicating the strategy of the company. Analysis and evaluation of the financial position of Hillside Engineering (see Appendix p. 8 for all ratio calculations) Businesses that trade as companies are required to produce the financial statement annually. The…show more content…
Return on capital employed (ROCE) is used to show how well an organisation uses its long-term investments in order to generate income. Depends on its target ROCE that is has set by the company, it can help the business to succeed in the future profitability as well as measure the company’s success or failure (Atrill, Mclaney, 2013). ROCE for Hillside in 2014 was 1.6%, in 2015 was 8.1% and in 2016 was 22.4%. Based on ROCE, Hillside had a much better performance in 2016 than in 2014 and 2015. The return on capital employed ratio indicates how much profit each £1 of employed capital makes. In addition, a higher ratio would be more favourable due to more pounds of profits are generated by each £1 of capital employed (Growthorpe, 2005). As was stated before, Hillside had a return of 22.4% in 2016 which means that for every £1 invested in employed capital it made £22.4 of profits, much more than in previous years. It can be argued that such as significant increase might was caused by higher operating profit. Gross profit percentage ratio is related to gross profit of the business to the sales revenue which is made for the same period. Aforementioned ratio shows profitability in buying and selling goods or services before any other expenses are taken into consideration (McLaney, 2006). Hillside gross profit percentage in 2014 was 17.9%, in 2015 was 20% and in 2016 was 23.5%. It increased in 2016
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