Financial Report Analysis - Assignment Example

The Group’s performance in 2012 is testament to the strength of their strategies, the quality of their technologies and the ability and determination of their employees and members. They made a final payment to shareholders of 11.9 pence per share bringing the full year payment to 19.5 pence per share, an increase of 11 per cent from the year 2011. Ratio analysis is very important to all companies as it gives an insight on the hidden features of the company performance. Rolls-Royce Company seems to be performing very well for the past five years and more so for the reports provided at the end of February 2013 (GROPPELLI, ANGELICO, EHSAN NIKBAKHT ,2000 pg. 43). All of the ratios calculated including profitability, liquidity, gearing and returns ratios exhibits the company as being on the right track in terms of growth.

The returns on investment and returns on capital employed have more than doubled in a period of one year. This is a clear indication that the shareholders’ funds are being employed in the right manner. On the profitability ratios, all of them have experienced growth and improvement in the last one year while maintaining a relatively constant growth in expenses which gives a good report on the company. the company is also very liquid as exhibited by the positivity and the growth of the liquidity ratios.

GROUP TWO YEAR REVIEW FOR THE YEARS ENDED 31ST DECEMBER INCOME STATEMENT 2012 2011 Revenue 12,161 11,124 Profit before net research and development and share of results of joint ventures and associates 2,488 1,536 Research and development (net) (589) (463) Share of results of joint ventures and associates 173 116 Profit before financing 2072 1189 Net financing 633 (84) Profit/(loss) before taxation 2705 1105 TAXATION (410) (257) Profit/(loss) for the year 2295 848 Attributable to: Equity shareholders of the parent 2281 850 Non-controlling interests 14 (2) Profit/(loss) for the year 2295 848 Research and development (gross) (919) (908) Underlying profit before taxation 1429 1157 EARNINGS PER ORDINARY SHARE: underlying 59.27p 48.54p basic 123.23p 45.95p Payments to shareholders per ordinary share 19.50p 17.50p BALANCE SHEET assets 18115 16423 liabilities (12010) (11904) Net assests 6105 4519 Ratio calculations Type of ratio formula 2012 2011 Liquidity ratios Current ratio Current assets Current liabilities 9593= 1.

33 7194 8315 = 1.202 6916 Acid test ratio Current assets- stock Current liabilities 0.95 0.83 Net working capital ratio Net working capital Net assets 2399 = 0.39 6,105 1399 = 0.31 4,519 Working capital Current assets – current liabilities 2399 1399 Cash ratio Cash + marketable securities Current liabilities 1317 = 0.183 7194 223 = 0.032 6916 Leverage ratios Debt ratio Total liabilities Total assets 12010 = 0.66 18115 11904 = 0.725 16423 Debt /equity ratio Total liabilities Net worth 12010 = 1.

97 6105 11904 = 2.6 4519 Long-term debt ratio Long term liabilities Net assets 11405 = 1.87 6105 11723 = 2.6 4519 Profitability ratios Gross margin ratio Gross profit sales 2745 = 0.2 12161 2448= 0.2 11124 Operating margin EBIT sales 2705 = 0.045 12161 1105 = 0.019 11124 Operating ratio operating expenses sales 1918 = 0.16 12161 1714 = 0.15 11124 Net profit margin Net profit sales 2295 = 0.19 12161 848 = 0.08 11124 return of investment (ROI) Net profit after taxes Total assets 2295 = 0.127 18115 848 = 0.

052 16423 Return on capital employed ROCE Net