Ratio Analyzes of Marks & Spencer Company - Research Paper Example

And secondly it enables the organization to understand which products or assets of the company are producing more revenues for the company, how efficiently these are being utilized and which products or assets are not profitable and should be replaced or eliminated. From the reporting perspective, accounting provides the bookkeeping of day-to-day activities and every transaction that is taking place. This essential role of reporting enables the company to evaluate itself and avoid any frauds or misinterpretations.

Form the decision making perspective, the decisions to evaluate the growth opportunities for the organization, for analyzing the performance of the company, for analyzing the company's ability to pay its suppliers and shareholders etc. a number of operational and strategic decisions like budgeting and investigating are made though accounting. Ratio Analysis is basically analyzing the relationship between different sections of the various financial statements and this analysis is based on a comparison.

Ratio analysis can be of two kinds: Comparative Analysis in which the ratios are compared with the industry average ratios and Trend Analysis in which the ratios of the same company are compared on a periodic basis i.e. a year is compared with the previous year. The profitability ratios show that overall the company is in profits and will achieve more profits in future. This is because the profit on sales is higher than the previous year and also the return that the company is getting on its assets has been increasing.

Although the return on equity has been decreased which makes the shareholders to resist from investing in future but the shareholders are still expected to invest because the return they are getting is still high and not very low considerably. 3.2. Liquidity Current Ratio Current Ratio = Current Assets/ Current LiabilitiesFor year 2006: = 1142.1/ 2017 = 56.62%For year 2007: = 846.4/ 1606.2 = 52.69%Quick RatioQuick Ratio = Current Assets - Inventories / Total Current LiabilitiesFor year 2006: = 1142.1- 374.3/ 2017 = 38.

06%For year 2007: = 846.4 - 416.3/ 1606.2 = 26.77%The liquidity ratios portray that the company's liquidity has been decreased over time and less cash on hand is present. This portrays that the company is investing more and is therefore low on liquidity. But these