StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Nobody downloaded yet

Ratio Analysis of Financial Statements - Case Study Example

Comments (0) Cite this document
Summary
This paper "Ratio Analysis of Financial Statements" discusses the system of ratio analysis that has been adopted for purposes of such analysis. Ratios have been calculated on the basis of extract of information from the final accounts of Maclnray’s Mint Limited…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92% of users find it useful
Ratio Analysis of Financial Statements
Read TextPreview

Extract of sample "Ratio Analysis of Financial Statements"

Download file to see previous pages In the second part of the write up a comparison between trading sole proprietor and company’s year-end accounting has been described.
Profit Ratio “measures the percentage of each sales dollar remaining after the firm has paid for its goods. The higher the gross profit margin, the better, and the lower the relative cost of merchandise sold.” (Lawrence. J. Gitman, 2000).

Operating profit margin is “measurement of management’s efficiency. It compares the quality of a company’s operations to its competitors. A business that has a higher operating margin than its industry’s average tends to have lower fixed costs and a better gross margin, which gives management more flexibility in determining prices. This pricing facility provides an added measure of safety during tough economic times.” (Investing for beginners) In fact, operating margin reflects the management cost efficiency with regard to the overhead expenditure.

Return on Total Assets is designed to effectiveness with which total assets of the company are utilized for its operational activities. Return on Total assets. Its calculations involve the use of profits before interest and taxes in order to match total assets performance only operational results. This is because interest and taxes are decisions that are taken by the management keeping the overall long-run perspective of the company in view.

Return on Equity (ROE) can be used to judge profitability, asset management, and financial leverage of the company. From the profitability point of view, ROE explains how efficiently the capital of the company has been employed to earn its profits. “This ratio indicates how profitable a company is by comparing its net income to its average shareholder's equity. The ROE measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and better returns to its investors.” (Richard Loath) ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Ratio Analysis of Financial Statements Case Study, n.d.)
Ratio Analysis of Financial Statements Case Study. Retrieved from https://studentshare.org/finance-accounting/1712949-module-title-managing-financial-resources-and-decisions-assessment-tiltle-maclnrays-and-final-accounts
(Ratio Analysis of Financial Statements Case Study)
Ratio Analysis of Financial Statements Case Study. https://studentshare.org/finance-accounting/1712949-module-title-managing-financial-resources-and-decisions-assessment-tiltle-maclnrays-and-final-accounts.
“Ratio Analysis of Financial Statements Case Study”. https://studentshare.org/finance-accounting/1712949-module-title-managing-financial-resources-and-decisions-assessment-tiltle-maclnrays-and-final-accounts.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Ratio Analysis of Financial Statements

Analysis of Financial Statements

Although this high level of debt provides higher level of ROE for the company, the debt levels are quite high thus entails very huge risks. A major recommendation for these companies is to conserve their funds instead of paying dividends, and use these in order to fund their growth instead of relying too much on debt.
While the two companies remain profitable, the apparent weakness in their operation is their liquidity position, where in most instances they have less than a dollar in current assets, much less in quick assets to cover a dollar of current liability. Although the companies manage their assets well in terms of efficiency, a major recommendation is to retire current portions of debt by long-term debt in order to i...
27 Pages(6750 words)Research Paper

Financial Statement Ratio Analysis

(basic raw material) plus an oven to bake the cookies (plant and machinery), and also a place to keep the oven (premises). Plus, not to forget, skilled labor (You've got to know how to make cookies OR hire someone who can.). Last but not the least, your have to find a way to sell the cookies - either hire a salesman with a fixed pay or hire an agent with a fixed share in profits (Selling and distribution overhead). All these factors would sum up to be the 'Cost' incurred on making the cookies. Based on this cost, you may decide your expected 'Selling Price' and thus the 'Contribution' per unit. (Activity Ratios)
Also, to keep things going, you would need enough money readily available for your short term requirements (like bu...
14 Pages(3500 words)Essay

Financial Ratio Analysis Report

...Financial Ratio Analysis Report a) General Motors General Motors, one of the leading auto company in the world, especially in the field of production and sales aspects. Due to the development of the business of GM (General Motors) the economy of the country also got developed. For the purpose of evaluating the financial performance of the company, it is crucial to analyze various annual reports and financial statements periodically. Price Ratios Company Industry S&P 500 Current P/E Ratio NA 12.0 23.6 P/E Ratio 5-Year High 16.8 2.0 36.2 P/E Ratio 5-Year Low 4.0 0.2 7.3 Price/Sales Ratio 0.08 0.59 2.69 Price/Book Value NA 1.94 4.42 Price/Cash Flow Ratio 1.70 5.80 13.70 (GM Ord Shs: Key Ratios, 2007). Moreover, it is necessary to evaluate...
6 Pages(1500 words)Essay

Financial Ratio Analysis

... FINANCIAL RATIOSRatio analysis is a procedure where an item of financial data is compared with another item of financial data so as to interpret the relationship between the two so that an understanding can be developed about the information and hence conclusions could be drawn. Liquidity Ratios evaluate a company’s ability to pay off their debts when they fall due. Basically it gives a basic picture of a running position of a company. Current Ratio This ratio illustrates a company’s ability to pay off its short term obligation/ current liabilities (amount due within 12 months time) with the current assets that it holds (Bpp Learning Media, 2009). GEARING RATIO Gearing is an essential element which helps in deciding upon the balance...
1 Pages(250 words)Case Study

Financial statements ratio analysis

...FINANCIAL MENTS RATIO ANALYSIS ID Table of Contents Purpose of ratios----------------------------------------------------------------------------3 2. Calculation of ratios------------------------------------------------------------------------4 3. Information and analysis------------------------------------------------------------------5 4. Comparison---------------------------------------------------------------------------------6 5. Recommendations-------------------------------------------------------------------------6 6. Conclusion----------------------------------------------------------------------------------7 7. Report marking guide general------------------------------------------------------------8 1. Purpose of each ratio...
4 Pages(1000 words)Essay

Financial Statements Analysis

...Financial ment Analysis of the Financial ment Analysis Financial ment of a company comprises of three major documents. They are income statement, balance sheet and cash flow statements. The information of these documents is used to calculate financial ratios. Financial ratios illustrate company’s financial health and show its position in the business landscape. Financial ratios are tools that help to interpret a company’s financial planning, and its performance during the existence of the business. It allows the company to compare own activities with respect to previous years as well as among other companies. Financial ratios enable to understand operating performance and financial condition of the company through profitability...
4 Pages(1000 words)Research Paper

Financial ratio analysis

... of the products offered by the supermarkets. The financial statements of the company are prepared according to International Financial Reporting System (IFRS) (J Sainsbury Plc., 2015c). The company has adopted IFRS as its accounting policies as it is followed in the European Union. Moreover, financial data in the statements are presented in sterling million. It is also prepared with the help of going concern method under the convention of historical cost (J Sainsbury Plc., 2015c). The main purpose of the report is to highlight the financial performance of J Sainsbury Plc through financial ratio analysis. The ratios during the year 2009-2014 are calculated to get a knowledge regarding the financial strength of the company. However...
6 Pages(1500 words)Essay

Financial ratio analysis

Finance and accounting [Insert al affiliation] The two companies that I have chosen for the Calculation of the financial ratios areQatar Oman and Qatar Cinema Company respectively. The calculation and the comparison are as below.
Leverage ratios
These are ratios that measure the extent to which a firm/company finances its investments through borrowing.
Type of ratio
Calculation (Qatar Oman company )
Calculation (Qatar Cinema Company )
Debt ratio

= 3.58%
= 18.96%
Liquidity ratios
These are ratios that are used to calculate the company’s ability to meet short-term obligations as they fall due. The ratios inspect the sufficiency of the company’s working capital. The ratios are computed...
1 Pages(250 words)Essay

Financial ratio analysis

...Ratio analysis (Qatar Navigation and Gulf warehousing Co Task Introduction The paper will present ratio analysis on two companies in the same industry. The Companies to be analyzed are Qatar Navigation Q.S.C. and Gulf warehousing Co. Both the companies operate in the transportation industry. The companies are publicly traded and have there shares listed on Qatar Stock Market. The following ratios will aid the analysis: leverage, liquidity, profitability, efficiency, and market value ratios. The analysis will cover one financial period (the year 2013). Based on the ratios, an inference will be made regarding a better performing company. The ratio calculations will be found in Appendix 1. Leverage ratio - Debt/Equity ratio The ratio shows...
2 Pages(500 words)Assignment

Financial ratio analysis

...Financial ratio analysis of Affiliation Financial ratio analysis Financial analysis is a critical aspect of understanding the of the company in terms of its liquidity level, profitability and its overall financial soundness. This essay seeks to examine the aspects attributed to the financial soundness of the DOHA Bank and the Commercial Bank of Qatar for the duration 2012-2013. As a point of departure various ratios will be computed to ascertain the financial position of these companies in a bid to choose the best company to invest. This kind of information is beneficial to the investors, employees and even management (Chesnick & United States, 2000). However, the intention of the ratio computation in this case is for the investment...
3 Pages(750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Ratio Analysis of Financial Statements for FREE!

Contact Us