Ratio analysis - Coursework Example

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The Gross Profit margin of the company increased from 20.63% to 21.42% between 2013 and 2014 which gives a difference of 1.21%. This could have been caused by…
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Download file to see previous pages This difference could have been caused by a reduction in expenses including operating and financing expenses. ROCE also increased from 25.03% to 32.18% which shows a difference of 7.15%. This difference could be due to efficient utilization of assets to produce income and effective asset management.
Liquidity of the company can be assessed using current ratio and quick ratio. Current ratio measures the number of times that current liabilities can be financed by current assets before they are exhausted (Pollitt, 2001). Quick ratio measures how current liabilities can be measured by more liquid assets before they are exhausted. The current ratio of Youngs increased from 1.37 in 2013 to 1.48 in 2014. This means that the company was able to meet its obligations faster in 2013 than 2013, i.e. it was able to meet its financial obligations easier in 2014 than 2013. The quick ratio of the company also increased from 0.36 in 2013 to 0.43 in 2014. Therefore, the company was more liquid in 2013 than 2014. This liquidity could be due to effective cash management in the company.
Efficiency of Youngs can be determined by inventory turnover and total asset turnover. The inventory or stock turnover measures the number of times that stock is turned into sales in a year (Fridson & Alvarez, 2002). Total asset turnover measures the amount of sales generated by the sale of a single unit of the total assets. The total asset turnover of Youngs was 2.11 in 2013 and 2.09 in 2014. This means that a single unit of asset was used to generate 2.11 units of sales in 2013 and 2.09 units of sales in 2014. However, the difference between the inventory turnovers in the two years was -0.02 which is a negative figure. It could be because the company acquired more assets and failed to utilize the new assets efficiently to generate more sales. The company also had an inventory turnover of 6.85 in 2013 and 6.88 in 2014. This indicates that the company turned its stock ...Download file to see next pagesRead More
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