Ratio Analysis - Essay Example

Download file to see previous pages... The paper uses Profitability, efficiency, liquidity and shareholder ratios as the basic tools. The more complex tools like IRR, WACC etc are ignored to keep the analysis simple and meaningful. In addition, the paper identifies the Key Performance indicators (KPIs) of the company and highlights the basic steps taken by the company to achieve the KPI targets. The company’s current year’s results with respect to the KPI targets are also discussed and highlighted. To:             Board of Directors of Go Ahead group Plc. From:         Robert Frost, Accountant Re:             Ratio Analysis and KPI discussion Date:        February 25, 2013 With regard to your concerning the analysis of organizational financial performance and position, I would like to present this report which summarized, analyzes and properly interprets the basic financial ratios of the company. I hope it will be of great help for you to understand and target the areas where improvement is required and further take strategic actions to improve and sustain the strong growth areas of our business. Introduction Go Ahead Group Plc is a leading company in the public transport industry. The company has a high regard in the industry for having social, financial and environmental aims working together at its core strategic plans. The company aims at providing transportation in the urban and other areas with less delays, high environmental targets and social responsibility. The company has captured the highest share of the transportation industry by focusing on the KPIs it has set. The company has also improved its efficiency and effectiveness in operations by reducing waiting times, increasing punctuality, spending more on security and comfort of the people and availability of their services with proper schedules and plans. The company’s financial analysis and discussion on its core competences is given below. Ratio Analysis Current & Previous Year The Return on Net Assets ratio reveals that the company is using the net assets very efficiently in carrying out its operations. The company is employing and making higher than expected profits by properly allocating the assets. The Return on Shareholders’ Funds in 2011 and 2012 shows significant returns to meet the company’s profit demands. Moreover, it completely satisfies the shareholders on the use and allocation of their shareholdings as per the returns generated in the two years under consideration. The operating profit margin, although slightly lower than previous year, is satisfactory. Moreover, if the one-off benefit is eliminated, the company shows an increase of ?8.1m in operating profit. Hence, the actual operating profit margin is higher than the previous year further showing a strengthened financial position of the company. The ROCE of 17.6% and 19.2% is satisfactory in 2012 and 2011 respectively (Appendix 1). The slight reduction is not worrying, yet it should be stopped from recurrence to maintain the position that the company holds. The net asset ...Download file to see next pagesRead More