Ratios report - Essay Example

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I have used the financial data from its published statements for a 5 year period from 2004 to 2008. La Farge’s financial performance has been compared to the industry and sector it belongs to see its relative…
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Download file to see previous pages This shows that the company has been aggressive in financing its growth through debts. Investors may be happy at this ratio because benefits of earnings are spread to the same number of stockholders and there is no need to add in new investors. However, analysts feels that a high debt financing may result to unstable earnings because of high interest that can be too much for the company to handle (Investopedia) The total debt to equity ratio of 115% shown in Table 1 is an analysis done by stock brokers that is higher than the sector average (Table 1 attached) A high ratio is generally accepted to capital intensive industry that tends to have a higher ratio, according to Investopedia
2. Financial analysis of the company’s published accounts over a five (5) year period (most recent) including profitability and liquidity ratios and analyzed with graph for each ratio are presented in annexed tables and charts.
Gross Profit ratio. As of 2008, La Farge has a gross profit ratio of 27.86% which is slightly lower than 27.89% of 2007. Its gross profit ratio does not differ much in previous years’ performances as shown in Table 1 and Chart 1. (Reuters Financial Statement)
Net profit ratio. The sales turnover of 2008 provided 8.40% net profit ratio for the company which is lower than its net profit ratio of 2007 that is 10.8% Table 2 and Chart 2 show Net Profit Ratio of the company for five years.
Return on Shareholders. In 2008, La Farge gave the shareholders a return on their investment of 18%. This figure is very much lower than the 25.39% ROS in 2007. Table 3 and Chart 3 show fluctuating ROS, with 2007 as having the highest, followed by 2004.
Share price of La Farge as of November 20, 2009 is €56.83. From the chart it showed significant upward movement from July to October. The share price movement is an indication of investors’ confidence to the company’s performance or a response to
economic problems. Stock ...Download file to see next pagesRead More
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