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Identify the main changes from one period to the other using analytical techniques, having calculated the ratios
Finance & Accounting
Pages 12 (3012 words)
Name: Instructor’s Name: Course: Date of Submission: 1. Identify the main changes from one period to the other using analytical techniques, having calculated the ratios. From the overall apparent analysis the company’s position has deteriorated from last year with a very significant fall seen in the company’s profit, cash flow reserves and balance sheet position…
The Return on capital employed (ROCE) has also fallen from 35% to 5.9% in March 2012 which is also mainly due to deceased profits for the year. Since profitability ratios are all based on profits for the year the underlying problem is the drastic fall in profit as compared to last year which is concerning. The operating profit margin has fallen by 9% from 10.8% to only 1.8% this year. Despite of increase in sales revenue an immense increase was seen in the cost of sales and the operating expenses which both increased by 30% and 43.6% respectively, while the sales is merely increased by 19.6%. Another factor further contributing to the decrease in profit is high interest cost incurred this year which has increased from $ 18m to $ 32m this year making an increase of 77.7%. On the efficiency side the ratios seems pretty constant this year form inventories turnover days remaining at 56.7 days which was 56.6 days last year, the debtors days at 37.2 days which has an decrease of 2 days which was 39.1 days last year. The sales to capital employed ratio have also been increased a little which is 3.36 times this year. ...
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