The ratio analysis of Johnson Matthey PLC and analysis of these rations will help assist investors of Johnson Matthey understand the company’s financial position compared to that last year and the industry averages themselves. In addition to this, it is with ratio analysis where investors can be advised on whether they should be buying, selling or holding their shares. Johnson Matthey, is a global leader in sustainable technologies where their products enhance the quality of life whilst focusing on clean air and clean energy having beneficial impact on the environment and the wellbeing of people.
Profitability analysis helps investors decide whether to invest in a company or not such as with Johnson Matthey where their profitability has…show more content… Moreover, Johnson Mattheys operating profit margin has also shown positive outlooks for 2015 compared to 2014 because of its increase of 1.28%, meaning for this accounting period Johnson Matthey has incurred less expenses than the year before for example as stated before the distribution costs have decreased from 2014 to 2015, making operation expenses lower which equals a lower amount of operating profits.
The definition of an efficiency ratio is “the measurement of how well a company can manage income and expenses. The accounts monitored are accounts receivable and payable.” (BusinessDictionary.com, 2015) For Johnson Matthey the efficiency of the company is not too bad when the settlement period for trade payables has increased by 2 days in 2015 which means compared to the year before on average they have had another 2 days to pay their creditor bills. The reasoning behind Johnson Matthey becoming efficient could be because of the decrease in both payables and cost of sales, meaning they are able to pay off their creditors later than the year before, so longer credit terms. Investors would be pleased with this because it means that the company is on good terms with