ACCOUNTING

Accounting

Requirement 01

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's financial performance in several key areas. The ratios are categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability Ratios, and Market Value Ratios.

Ratio

Formula

2009

2010

2011

ROE

Net Income/Shareholder's Equity

0.14

0.06

0.12

ROCE

EBIT/(TA-CL)

0.32

0.18

-0.02

Asset Turn

RevENue/Assets

0.06

0.03

0.06

Operating Profit

Opertaing Rev-Pertaing Exp

126.00

72.00

-8.00

Gross Profit

 

780.00

581.00

292.00

Current ratio

CA-CL

1.41

1.54

1.74

Quick ratio

CA-Inventory/CL

1.09

1.09

1.21

Trade receivables days

(AR/Sales)*365

72.81

104.81

121.08

Trade payables days

(AP/COGS)*365

78.21

120.58

80.51

Inventory turn

COGS/COSG

10.35

5.14

4.99

Gearing (leverage)

total debt / total equity

1.18

1.16

0.95

Interest cover

EBIT/Interest Exp

12.60

6.00

-0.25

EPS

NI/Share outstanging

0.16

0.07

0.13

Dividned Cover

EPS/Dividend

0.53

0.37

0.33

Ratio Analysis as a tool possesses several important features. The data, which are provided by financial statements, are readily available. The computation of ratios facilitates the comparison of firms which differ in size. The decision of top management depends upon the available ratios of the company. The ratio gives the perfect image to view the position of the company. Like in this case some of the liquidity ratios are increasing this shows that company is sound enough to pay all its current obligations. Just like these ratios EPS is also going in upward trend, and company is earning good amount against their issued share. In the present scenario the management must focus on the movement of the gross profit margin ratio because as we see that the ratio is going in decreasing trend, and on the other side the gearing ratio is decreasing which is a healthy sign, mean the liabilities are decreasing over their assets. The operating profit of the company is going in decreasing trend; in 2011 the result of operating ratio is suggesting that even the ratio is in negative, this shows that the company is bearing too much operating expenses which are causing problems for the company to pay off rest of its expenses, and even the dividend to the stakeholders.



Requirement 02

Sales revenue

100000

Less: Variable costs

80000

Less: Fixed costs

30000

Budgeted loss

-10000

 

 

Break Even Point

Fixed Costs / (selling price - variable costs)

Breakeven ...