Principles of Accounting-- ratio analysis - Essay Example

This report provides the financial analysis of e-Generation. Financial ratios will be used as the main approach of financial analysis. Horizontal analysis will also be provided to compare the financial performance of the business in different periods. The calculations will be provided based on the software generated financial information for the business. Although the ratios will be provided for the month of January, comparison will be made between the results at the end of January and the results on 10th of January.

This analysis will be important in understanding and evaluating the performance of the business in order to acquire information necessary for decision making by stakeholders. There was higher profit margin in period 2 than period 1. The profit margin foe e-Generation for period is 10.61%. This means that for every unit of sales the company makes 0.1061 profits (Sutton, 2004). This means that the company is making positive profit. This reflects a decrease from the profit margin of period 3 which was 13.38%. Therefore, the company controlled its expenses in period 3 better than period 4.

The company did not control its expenses consistently throughout the moth because profit margin ratio fluctuated. Period 2’s gross profit margin was lower than period 1’s. The gross profit for period 4 was 26.3% meaning that the company made a gross profit of 0.263 for every unit of sales. This is a good performance and an increase from period 3. This means that the business managed its cost of sales in period 4 more than period 3. The return on assets ratio was 4.08% in period 4 which means that for every single unit of asset the business earns a profit of 0.0408. In period 3, the business record ROA of 3.

7% which means that the company earned more profits for every unit of assets in period 4 compared to the period 3. In period 1 ROE was low compared to period 2. The ROE at period 4 is 12.06% which indicates that the company made a profit