The Return On Total Assets Ratio Essay

925 Words Mar 14th, 2016 4 Pages
Figure 2 Profitability ratios
The return on total assets ratio was computed to establish the return on net earnings from an investment of $1 in total assets (Gibson 2010, p. 308). From table 1 above, the report established that the return on total assets for the British Empire Securities Plc. was 11.48% in 2013 and 5.8% in 2014, indicating a reduction in the rate of return of $1 invested in assets. In 2013, $1 of assets contributed $0.11 towards the profit, while in 2014, it was $0.058.
The return on equity was also analysed to find out the profitability contribution by each $1 contributed by the common stock owners. The ROE of British Empire Securities Plc. was 11.71% in 2013, and dropped to 6% in 2014 as shown in table 1 and figure 2 above.

Liquidity Ratios
The report analysed this category of ratios to determine the short term financial perspectives of British Empire Securities Plc. and its competitor. The ratios show the liquidity position and strength of an entity, with higher liquidity indicating instances of reduced risks while lower ones translate to greater risks. The ratios also measure the company’s ability to pay its short-lived obligations when they mature (Chadwick 2007, p. 36). Given the nature of the operations of the companies of study, the report analysed their liquidity position by computing the current ratio and the cash ratio as shown in table 2 below
Table 2 Liquidity ratios
Year Current ratio = current assets/ current liabilities…
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