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    Ratio Analysis

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    ijaz bokhari
    Here are the calculations of the ratios for XYZ Ltd for 2016-2018 and the comparison with the average ratios: Ratios 2016 2017 2018 Average Return on capital employed 27% 28% 15% 20% Current ratio 1.22 1.22 1.31 1.25 Asset turnover ratio 1.80 1.70 1.90 1.50 Net profit margin 10% 11% 9% 10% Gearing ratio 45% 41% 39% 40% Analysis: - Profitability was above average in 2016-2017 but fell below in 2018. Return on capital employed

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    Ratio Analysis

    Uploaded by

    ijaz bokhari
    104 views3 pages
    Here are the calculations of the ratios for XYZ Ltd for 2016-2018 and the comparison with the average ratios: Ratios 2016 2017 2018 Average Return on capital employed 27% 28% 15% 20% Current ratio 1.22 1.22 1.31 1.25 Asset turnover ratio 1.80 1.70 1.90 1.50 Net profit margin 10% 11% 9% 10% Gearing ratio 45% 41% 39% 40% Analysis: - Profitability was above average in 2016-2017 but fell below in 2018. Return on capital employed

    Original Description:

    Analysis of Financial Statement

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    Here are the calculations of the ratios for XYZ Ltd for 2016-2018 and the comparison with the average ratios: Ratios 2016 2017 2018 Average Return on capital employed 27% 28% 15% 20% Current ratio 1.22 1.22 1.31 1.25 Asset turnover ratio 1.80 1.70 1.90 1.50 Net profit margin 10% 11% 9% 10% Gearing ratio 45% 41% 39% 40% Analysis: - Profitability was above average in 2016-2017 but fell below in 2018. Return on capital employed

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    104 views3 pages

    Ratio Analysis

    Uploaded by

    ijaz bokhari
    Here are the calculations of the ratios for XYZ Ltd for 2016-2018 and the comparison with the average ratios: Ratios 2016 2017 2018 Average Return on capital employed 27% 28% 15% 20% Current ratio 1.22 1.22 1.31 1.25 Asset turnover ratio 1.80 1.70 1.90 1.50 Net profit margin 10% 11% 9% 10% Gearing ratio 45% 41% 39% 40% Analysis: - Profitability was above average in 2016-2017 but fell below in 2018. Return on capital employed

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    © All Rights Reserved
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    You are on page 1of 3

    X2

    Name: Registration no:

    Question 1: Report Writing

    You have been hired as an analyst for Standard Chartered Bank and your team is working on an
    independent assessment of ABC Food Inc. is a firm that specializes in the production of freshly
    imported farm products from Punjab. Your assistant has provided you with the following data for
    Flipper Inc and their industry.

    2018-
    Ratio 2016 2017 2018 Industry
    Average
    Long-term debt 0.45 0.40 0.35 0.35
    Inventory Turnover 62.65 42.42 32.25 53.25
    Depreciation/Total Assets 0.25 0.014 0.018 0.015
    Days’ sales in receivables 113 98 94 130.25
    Debt to Equity 0.75 0.85 0.90 0.88
    Profit Margin 0.082 0.07 0.06 0.075
    Total Asset Turnover 0.54 0.65 0.70 0.40
    Quick Ratio 1.028 1.03 1.029 1.031
    Current Ratio 1.33 1.21 1.15 1.25
    Times Interest Earned 0.9 4.375 4.45 4.65
    Equity Multiplier 1.75 1.85 1.90 1.88

    a. In the annual report to the shareholders, the CEO of ABC Foods wrote, “1997 was a good
    year for the firm with respect to our ability to meet our short-term obligations. We had
    higher liquidity largely due to an increase in highly liquid current assets (cash, account
    receivables and short-term marketable securities).” Is the CEO correct? Explain and use
    only relevant information in your analysis.

    b. What can you say about the firm's asset management? Be as complete as possible given the
    above information, but do not use any irrelevant information.

    c. You are asked to provide the shareholders with an assessment of the firm's solvency and
    leverage. Be as complete as possible given the above information, but do not use any
    irrelevant information.

    d. ABC foods want to raise the funds for future projects, you are support to provide which
    source of finance is more suitable for company.
    X2

    Question 2: Ratio Calculation

    Financial information on XYZ Ltd.


    1. Summary profit statements
    $m $m $m
    2016 2017 2018
    Sales turnover 4.90 5.30 6.60

    Operating costs 4.17 4.43 5.82

    Operating profit before tax 0.73 0.87 0.78

    Taxation 0.24 0.30 0.27

    Profit after tax 0.49 0.57 0.51

    Dividends 0.12 0.16 0.16

    Retained profit 0.37 0.41 0.35

    2. Summary balance sheets


    $m $m $m
    2016 2017 2018
    Fixed assets 2.40 2.77 2.88

    Current assets
    Stocks:
    Raw materials 0.09 0.12 0.15

    Finished goods 0.40 0.43 0.45

    Debtors 1.14 1.32 1.84

    Bank 0.03 0.04 0.05


    1.66 1.91 2.49

    Less Current liabilities 1.35 1.56 1.90

    Net current assets 0.31 0.35 0.59


    2.71 3.12 3.47

    Capital and reserves 0.5 0.91 1.26

    Bank loans 2.21 2.21 2.21


    2.71 3.12 3.47
    In your role of assistant financial manager, you are to prepare an analysis of the company's figures
    over the three-year period using the performance criteria listed in the inter-firm comparison table.
    X2

    1. Calculate all the ratios given in the average ratios for federation members for 2016, 2017 and
    2018.
    2. Prepare a detailed report on the company's performance in terms of profitability and liquidity
    compared with the average of the sector over the period.

    Formula required:

    Return on capital employed: Net profit before tax and dividend / Capital employed x 100

    Current ratio: Current assets / current liabilities

    Asset turnover ratio: Turnover / Capital employed (total assets)

    Net profit margin: Net profit before tax and dividend / turnover x 100

    Gearing ratio: Loan capital / total capital employed x 100

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