Financial Accounting and Reporting – Ratio Analysis The following five-year summary relates to VKM Ltd, and is based on financial statements prepared under the historical cost convention. Financial Ratios 2006 2005 2004 2003 2002 Profitability Margin Trading Profit Revenue % 7.8 7.5 7.0 7.2 7.3 Return on Assets Trading Profit Net Operating Assets % 16.3 17.6 16.2 18.2 18.3 Interest & Dividend Cover Interest cover Trading Profit Net Finance Charges times 2.9 4.8 5.1 6.5 3.6 Dividend cover Earnings Per Share Dividend Per Share times 2.7 2.6 2.1 2.5 3.1 Debt to Equity Ratios Net Borrowings Shareholders’ funds % 65.9 61.3 48.3 10.8 36.5 Liquidity Ratios Quick ratio Current Assets less inventory Current Liabilities % …show more content…
16 %. (See Diagram D) 1.5 Interest and Dividend Cover: Interest cover demonstrates a trend towards reduction (ca.20% (55%)) (Note initial increase). Dividend cover also shows overall tendency towards reduction (ca. 13%). (See Diagram E) 1.6 Per Share Data: Dividends per share have increased continuously (ca.44%, or 11% p.a. average). EPS demonstrate an initial 2 year reduction but then continue to increase and the overall trend is towards increase (ca.28% (42%) or ca.6% p.a.). Net assets per share have increased continuously (ca 30%, or ca.6% p.a.) (See Diagrams F and G) 1.7 Other trends: On a per share basis, Net Assets per share demonstrates an increase (ca.30%) while the total Return on Assets shows a reduction of 11% 2.0 Analysis of Ratios and Trends 2.1. Profitability and Efficiency: a.) VKM`s Profit Margin is increasing. A high or increasing profit margin can indicate that the company is in a position to price its products at premium. This can be seen in connection with entrenched business models, such as those selling a proprietary good or service, or by exploiting a monopoly position. On the other hand it maybe possible that Management is efficient in reducing costs and expenses resulting in an increased margin. While profit margin is directly related to pricing and cost, an increasing margin does not necessarily translate into increasing
Similar to return on equity, return on assets can be used to measure profitability between two companies. It measures the total investment made by a company with respect to net income. Net sales for both companies declined as described in the return on equity section. At the same time, both Staples and AEO continued to
Debt ratio percentages increased for Company G from 28.34% to 29.94%. Industry quartile is 30, 45 and 66 percent, putting Company G below average. Debt Ratio represents strength for Company G.
The following report is a brief comparative analysis of two of Australia’s largest deposit-taking financial institutions (FI), Australia and New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corporation (Westpac). This report seeks to identify which of the FIs has a greater aggregate return per dollar of equity and thus establish the highest performer, or most profitable, of the two. The Return on Equity Model (ROE) (Koch & MacDonald,
Is it possible for companies both to maximize financial value and be socially responsible? Explain
The return on shareholders’ fund, capital employed, total assets all have gone down during this period. The ability of the company to pay its short term debt hasn’t varied much, but the administrative expenses have gone up by a very large amount.
The return on equity (ROE) has also shown an increase in 2009 over the previous year suggesting a successful investment by shareholders. This increase, coupled with the fact that the basic earnings per share (EPS) has increased significantly from 61.78 cents in 2008 to 88.26 cents in 2009 (143%) shows great improvement in the profit per share. Please note that the basic EPS has been used in this analysis as the diluted EPS includes employee options (JBH Annual Report, 2009), skewing and reducing the value of the EPS.
This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.
So while the company increased its net income, it has done so with diminishing profit margins.
Give two examples of where historical cost information is reported in P&G’s financial statements and related
The Net Profit Margin in 2012 was 10.5% while in 2013 it was 66.6%. This increase in the Net Profit Margin can be attributed to the increase in net profits after taxes despite the fact that there was a slight decrease in revenues.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
Financial ratios 1. Current ratio Current ratio= Current Assets/Current Liabilities 18,720 / 17,089=1.0954 2. Quick ratio Quick ratio= (Current Assets – Inventories) / Current Liabilities (18,720 – 3,581)/17,089=0.8859 3. Return on Assets ratio
Interest Expense Rate is continuously increasing from 1992 to onward. It shows that company is paying high financial charges over short term and long term borrowings.
Financial results and conditions vary among companies for a number of reasons. One reason for the variation can be traced to the characteristics of the industries in which companies operate. For example, some industries require large investments in property, plant, and equipment (PP&E), while others require very little. In some industries, the competitive productpricing structure permits companies to earn significant profits per sales dollar, while in other industries the product-pricing structure imposes a much lower profit margin. In most low-margin industries, however, companies often experience a relatively high rate of product throughput. A second reason for some of the
The current EPS of the company is now $14-$15. Historically, the dividend payout ratio mounts to an average 50%. So, the company expects payout the payout in 1959 to be $7/share. In the previous year the dividend rate was cut from $1.3 to $1.2 per share. But after the new deal, the CEO proposed a hike in the quarterly payout to $1.6 per share from the $1.2 given at present. The CEO even suggested the dividend rate to be propped up to $1.80 in 1960.