• Internal Code :
  • Subject Code : 200910
  • University : Western Sydney University
  • Subject Name : Accounting and Finance

Analysis of Financial Performance

Australian Vintage Limited

Ratios

Formula

2019

2018

Gross profit margin

Gross profit/Sales

0.090

0.089

Operating profit margin

EBIT/Sales

0.060

0.061

Net profit margin

Net profit/Sales

0.030

0.029

Return on assets

EBIT/Total assets

0.037

0.037

Return on equity

Net profit/Ordinary equity

0.027

0.026

 

Clean Seas Seafood

Ratios

Formula

2019

2018

Gross profit margin

Gross profit/Sales

0.052

0.100

Operating profit margin

EBIT/Sales

0.008

0.058

Net profit margin

Net profit/Sales

0.004

0.058

Return on assets

EBIT/Total assets

0.006

0.042

Return on equity

Net profit/Ordinary equity

0.004

0.048

All the profitability ratios of Australian Vintage Limited are quite similar for both years which indicate that the company is growing positively. The reason behind increment in the profitability ratios by 0.001 is the increased level of gross profit, net income, total assets, total sales and shareholders’ equity. The management of the company is exercising effective control over the cost of goods sold and operating expenses of the company. Adequate efforts have been made by the management in raising the returns for the shareholders’ of the firm. It is making significant efforts to identify the market opportunity in order to raise the income of the firm by carrying out operations in the right direction.

On the other hand, there is a decline in all the profitability ratios of Clean Seas Seafood from 2018 to 2019 which indicates significant decline in growth of the company. This is due to decline in the level of sales and net income. The management of the company is losing profitability and control over its cost of goods sold and the company’s expenses. The strategies formulated by the company are not effective enough to earn profitability. It is not able to generate significant returns that are to be provided to the shareholders of the company. There is a negative influence of the market environment on the firm’s operations due to which it is facing difficulty in raising the return from carrying out the firm’s operations.

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