The Financial Position Of Melbourne

1356 WordsOct 11, 20146 Pages
Executive summary Melbourne IT limited, founded in 1996 provides internet based technology services such as internet domain name, web hosting, online brand protection and promotion. The company operates through two major segments which are SMB solutions and Enterprise services. The aim of this paper is to analyse the financial position of Melbourne IT limited through the use of financial ratios, based on the annual report for the periods December 2012 and 2013. Financial ratios are useful since they measure a company’s performance and give an overview of the financial situation. Ratios are also used to analyse trends and to compare a firms financial figures to other competitors within the same industry. There three main ratios analysed…show more content…
Bazely and Hancock (2010) During the period 2012 and 2013, the Operating profit margin decreased from 9.2% to 5.7%. This slight decline can be attributed to the decreased revenues and the increase in tax expenses. 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. During this period, the Return on Assets increased from 5.7% in 2012 to 34.6% in 2013. This implies the number of cents earned on each dollar of assets increased from 2012 to 2013. This shows that the business has become more profitable. Equally, the Return on Equity also increased from 12.0% in 2012 to 46.5% in 2013. This similarly implies that the company in 2013 was more efficient in generating income from new investment. This, also can be attributed to the sale of the Digital Business Brand which enabled the company appraise its strategic plan. The Earnings Per share in 2012 and 2013 were $2.90. This is an indicator that the company is still profitable since the ratio is a constant. The price per earnings in 2012 was 12.5 and 17.7 in 2013. A decrease in the price per share may indicate a vote of no confidence to investors. However, this can be attributed to the industry sector as well the stock. Liquidity ratios Liquidity ratios measure the ability of a firm to meet its short-term obligations. A company that is not able

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