RATIO ANALYSIS

Ratio Analysis

Ratio Analysis

EXECUTIVE SUMMARY

This report was made to advice individuals or potential investors who are looking to invest in Tweedie plc business. The report carries an in-depth analysis for the profitability, efficiency, liquidity and investment ratio of the company. Some of the figures have been rounded up to the nearest decimal. In general the company is not making good profit in the present year because the ratio shows a decreased in profitability as well as efficiency.

INTRODUCTION

This report will cover the annual report of Tweedie plc using ratio analysis and explaining the users of ratio analysis and their needs, limitations of ratio analysis, n executive summary of Tweedie plc and a conclusion with a recommendation.

Tweedie is a public limited company based in the north of England, selling leisure equipment to sports centres and theme parks. The company has turnover of 75% which comes from the contract agreement they have with three customers. Tweedie plc had to reduce its selling price because of growing competition pressure.

Tweedie plc bought a factory in Eastern Europe as part of its production expansion during 2009, where the labour costs are lower than the UK. A major marketing campaign resulted in an expansion of its customer base with significant sales increases to (£74,880) in the second half of 2009 which are expected to continue in 2010 and 2011

MAIN USERGROUPS OF ACCOUNTING RATIO AND THEIR NEEDS

The users of accounting understand and analyze their financial condition through ratio analysis. These users could be:

Lenders, their major concern are risk of given out loan and its consequences of not paying back. Therefore they are interested in ratio analysis information because it helps them determine whether they will get back their loans on time and if an interest will be paid in a due time. They look into company's efficiency ratio information to know if that company can pay back their loan on time. (Proctor, R 2006)

Investors are interested in knowing the information about ratio analysis of profitability, because it give them knowledge on whether they should invest or buy particular shares or not from a company and also help them determine if they should keep the shares they own in the company.

Suppliers and trade creditors, the suppliers have to read their account or research on other businesses to make sure such businesses have no problems. Suppliers or trade creditors do this because they want to be extra convinced that such a company will pay them their bills.

Employees are more interested about the profitability and stability information of those who employed them (employers). Other information they are interested on are remuneration, employment opportunities and retirement benefit. Matters which are likely to be interest to employee include: employer ability to meet wage agreements, management intentions regarding employment levels, location and working conditions.

LIMITATIONS OF RATIO ANALYSIS

Managers always want to know the situation of a company in order for them to determine future improvements. This is one of the reasons why most of company's carry out calculation and ratio analysis always in order ...