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Corporate Finance : Financial Analysis - Assignment Example

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Corporate Finance Assignment Corporate Finance Assignment To: Board of Directors Subject: Financial Analysis Date: 21-07-2012 a) The company’s profitability in the year to 31/12/2011 Income Statement Analysis: I am required to present a report on the profitability of the company International Commitments Ltd…
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Corporate Finance Assignment: Financial Analysis
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"Corporate Finance : Financial Analysis"

Download file to see previous pages The non-cash expense depreciation amounts to € 2,518,000 which is 19% of the revenue incurred by the company and decrease the EBIT by 19%. The company has invested heavily in the non-current assets which is € 19,973,000 which is the reason of high depreciation charge every year. On the other hand the company is bearing high interest expense of € 685,000 which is because of the high amounts of long term liabilities obtained. The income before tax of the company for the year is € 1,881,000 which makes a gross profit of 14.25%. The GP ratio shows the company is profitable and is successful in meeting its expenses seeing its revenue. The income after tax amounts to € 1,223,000 which makes a net profit of 9.27% which is a good NP ratio for any company as it is meeting its expenses and earning a profit. By the profit and loss statement analysis the company seems to do well in all the areas is a profitable entity which is able to earn profit after meeting its expenses. ...
in business’s assets or liabilities from previous years and can be a good determinant of company’s performance considering its position from last year. That is, the earnings obtained from the assets employed in the execution of the business shows its profitability. International Commitments Ltd. The return on capital employed of the company can be calculated as 5%, considering the net income and the long term assets invested in the company to generate the earnings. ROCE of the company seems to be stable and the company is profitable in this aspect which means it is earning well according to the amount invested in its assets. Another profitability ratio that could be used to determine the balance sheet standing is Return on Equity (ROE) which analyzes the net income earned and the shareholders equity to generate that income. This shows the level of earnings made in comparison with the amount of equity introduced by the shareholders. International Commitments Ltd. The return on equity of the company can be calculated as 12.5% considering the net income and the equity invested in the company by the shareholders to generate the earnings. The company also seems to be profitable in this aspect. The company’s Earning Price Ratio (EPS) is a good measure for company’s performance reflected by the number of shares issued by the company, that is the amount of ordinary shares issued and the capital obtained from the shareholders initially. The company’s EPS can be calculated as € 0.59, which means the company earns € 0.59 per share issued by the company. (b) The company’s financial performance in the same year in terms of liquidity, financial leverage, and value added during the year. Liquidity: Liquidity ratios are important to analyze company’s liquidity ...Download file to see next pagesRead More
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