Produce a report analysing past 3years financial performance of Stanley Leisure plc - Essay Example

hows the ability of the firm to meet its short term obligations from the most liquid assets, the trend is the same except in 2006 where there is a slight improvement.Reasons:The reason for the decline of the liquidity position is due to a poor working capital management policy embraces by the firm.ImplicationsThe firm's ability to meet its short - term inducing financial obligations is declining over time. 2. ProfitabilityProfitability of the firm can be measured using the gross profit margin ratio, operating profit margin ratio and the net profit margin ratio.

ObservationProfitability of the firm declined in 2005 compared to the 2004 results before shooting up again in 2006. This is shown by the gross profit/ margin ratio declining from 4% in 2004 to 3.2% in 2005 before shooting to 10.4%. And lastly, the net profit margin ratio has also followed the same trend - 1.34% - 1.29% - 5.25% ImplicationsThe implications of the above observations can be adequately analysed on a ratio by ratio basis.(a) Gross Profit Margin RatioThis ratio shows the ability of the firm to control the cost of goods sold expenses.

It means that for every 100% of sales 9Turnover) the gross profit was 4%, 3.2% and 17.3% for the years 2004, 2005 and 2006 respectively. The cost of sales comprised of 96% (100% - 4%), 86.8% (100% - 3.2%) and 82.7% (100% - 17.3%) for the years 2004, 2005, and 2006 respectively. This shows that the firm is not able to control its cost of goods sold expenses.(b) Operating Profit Margin RatioThis ratio shows/ indicates the ability of the firm to control its operating expenses such as telephone insurance premiums, salaries & wages distribution expenses etc.

It shows that 95.77% (100% - 4.23%); 96.6% (100% - 3.4%) and 89.6% (100% - 10.4%) of sales revenue was. This ratio shows the ability of the firm to control the cost of goods sold expenses. It means that for every 100% of sales 9Turnover) the gross profit was 4%, 3.2% and 17.3% for the years 2004, 2005 and 2006 respectively. The cost of sales comprised of 96% (100% - 4%), 86.8% (100% - 3.2%) and 82.7% (100% - 17.3%) for the years 2004, 2005, and 2006 respectively. This shows that the firm is not able to control its cost of goods sold expenses.

This ratio shows/ indicates the ability of the firm to control its operating expenses such as telephone insurance premiums, salaries & wages distribution expenses etc. It shows that 95.77% (100% - 4.23%); 96.6% (100% - 3.4%) and 89.6% (100% - 10.4%) of sales revenue was incurred to meet a) Cost of goods sold expenses and b) Operating expenses. Even though there was an improvement in 2006, the rates are still low and the firm must look for means and ways of further curbing the operating expenses.

This ratio shows how the firm is able to control its financing expenses (interest charges), operating expenses and cost of goods sold expenses. For XXXX co, it means that for ever 100 of sales revenue only 1.34, 1.29 and 5.25 remained as profit after tax and 98.66; 98.71 and 94.75 relate to the amount incurred in paying off expenses including tax and interest charges. Investments are simply total assets.