Andrews - Research Paper Example

Question no income ment Andrews For the period of 2007 particulars amount particulars amount opening stock 63000 sales 609000 purchases465000closing stock88000gross profit169000697000697000repair to building1980gross profit169000car expenses2120salaries89240discount received8140discount allowed10610rate and insurance2030bad debts3190general expense15860depreciation2420127450net profit49690177140177140balance sheetAndrewsAs at march 2007particularsamount ()particularsamount ()capital 205000fixed assetsdrawings-25060motor car8640retained earning49690free hold land and building106500creditors40350fixtures and fitting13140accrued salaries3180inventory88000debtors net51130prepaid insurance450bank5300273160273160Question no 2"Liquidity of the CompanyWe have analyzed two important liquidity ratios: Current Ration, and Working Capital.

A current ratio of 2 is considered "adequate liquidity". The company has Current Ratio numbers for 2006 and 2005 1.2 and 1.1 which shows that the company has at least good funds to discharge the short term obligations and also there is an increase in the ratio which is also good in the future.Interest coverage ratios shows that how much times the profit covers the interest which is a financial liability .the company's interest ratio is 20 for 2006 and 12 for 2005 which shows that the company is financially stable.

Profitability ratioROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every dollar of net assets. The RoE of the company is 0.8 and 0.6 for 2006 and 2005 respectively. The numbers shows that the company is not so much good in generation revenues and is not increasing the share holders wealth. High ROE yields no immediate benefit. Since stock prices are most strongly determined by earnings per share (EPS). The benefit comes from the earnings reinvested in the company at a high ROE rate, which in turn gives the company a high growth rate.

Efficiency ratios:Inventory turnover ratio shows that how the company is managing its stock the numbers for the company is 31 nad 19 for 2006 and 2005 respectively. By analyzing the company's inv. Turnover ratio we have analyzed that the company is not managing its inventory in 2006 that of 2005.Debtors turnover ratio tell about the company's management that how the receivables are collected and the company has good debtors ratio which is a proof of the managements efficiency.The asset turn over ratio gives an idea about how well the company is using its assets in generating revenues.

The numbers for the company are 1.6 and 1.1 for the year 2006 and 2005 respectively, which shows that the company is well doing in using its assets and also there is an increase in the ratio which tells about the growth of the company.Earning per share:Earning per share is the share holder specific ratio which tells that how much the company is creating wealth for its share holders the company's EPS is 12.8p and 9.3p for the year 2006 and 2005 which shows that the company is adding wealth to its share holders and is growing year to year.

Appendix:efficiency ratios2006200520062005inventory turnovercogs2402609144195031.8285419.10222ave inv.7548675486receivable turnoversales309557619090513.3354952.05701av. Rec.928071928071fixed asset turn oversales309557619090513.8589542.909824fixed assets802180656071total asset turnoversales309557619090511.6548311.146973total assets18706301664425solvency and liquidity ratiosinterest coverageEBIT35950124422920.6954712.76881interest payment1737119127current ratiocurrent assets106845010083541.2117641.

105099Current liab.881731912456profitability /investment ratioGP marginGP69296746710122.3857224.46771sales30955761909051NP marginNP2269301770307.3307849.273194sales30955761909051ROENP2269301770300.8789840.685703Total equity258173258173RoCEBIT3595012442291.3924810.94599Total equity258173258173