Ratio Analysis : The Performance Of The Company

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Ratio analysis is a very useful tool when it comes to understanding the performance of the company. It highlights the strengths and the weaknesses of the company and pinpoints to the mangers and their subordinates as to which area of the company requires their attention be it prompt or gradual. The return on shareholder’s fund gives an estimate of the amount of profit available to be shared amongst the ordinary shareholders; where as the return on capital employed measures an organization 's profitability and the productivity with which its capital is utilized. Return on total assets is a profitability ratio that measures the net income created by total assets amid a period.

The liquidity ratios inform the managers and other stakeholders
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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. Graphical analysis RSF, ROCE, RTA

The graph is in descending order. 1 is year 2013 and 10 is year 2004. The graph above shows that during the earlier years the Return on shareholders’ fund is much higher than the return on capital employed whereas in the later years that is from 2009 onwards the Return on shareholders’ fund and return on capital employed move very close to one another which means that the return on shareholders’ fund for Barclays declined aggressively, whereas after 2011 both lines start touching one another, this means that both these returns have a direct relationship, if one increases the other increases or vice versa. The line for return on total assets almost always touches the x-axis. It was a bit higher than the x-axis in the earlier year but then later on that is after 2009 it touches the x axis throughout till 2013. There is no such relationship of return on total assets with return on shareholders’ fund or return on capital employed which is very prominent in the graph, but one thing is certain, all three returns move together.
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