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Financial Analysis: Answer 6

a. Profitability ratios

The profit of the company is showing positive trends as all the ratio are having an increasing trend that shows that the Returns are increasing over the years. The only fall is seen in the gross margin during the year 2022. It is a slight fall in the gross margin as compared to last year but the operating margin for the same period has improved. This means the companies cost of sales in increasing which is covered by a reduction in the operating expenses.

b. Efficiency ratios

The efficiency ratios also showing increasing trends over the years that means the company is overall increasing its efficiency in the operations. The reduction is seen only in the sales in the year 2020 due to sales to capital employed have reduced. The sales of the company are showing a decreasing trend which is a matter of concern.

c. Liquidity ratios

The liquidity ratios are near to constant over the years. The ratio between current assets and liabilities are properly maintained by the company.

d. Leverage ratios

The company has been reducing its payout ratio and increased its retention in the 3 years span. This is to repay the debts and invest in the plant and equipment which will further improve the return to shareholders. The dividend yield has been at an average of 3% but fluctuating due to volatile market conditions.

e. Investment ratios

The earnings per share are showing a positive trend and improving over the years. The company shares are well priced compared to its earnings but this has reduced in the year 2022 due to falling in the shareholder's confidence over the company.

Financial Analysis: Answer 7

a. Profitability ratio

The return of the company is below the industrial average. The gap in return on equity is higher. The return on capital employed is also less than the industry. This shows the company is generating return lower than the average return generated by the industry. This ratio also shows that the margin of the company is higher than the industry. The company is earning higher profit but due to more capital employed than the industry the return on capital is lower than the industry.

b. Efficiency ratios

The company is having efficiency similar to the industry except for the level of inventory maintained is lower that shows a positive sign and the period of accounts payable is higher. This may have a negative impact on the company as the bargaining power of the company will reduce and thus competitive advantage may be lost.

c. Liquidity ratios

The company is having higher liquidity as depicted by the current ratio and quick ratio however; the current ratio ranks lower than the industry average while quick ratio is more than the industry average. Overall, the firm is having a strong performance in terms of liquidity as current assets are more and thereby liquid funds are readily available to repay the obligations.

d. Leverage ratios

The company is having huge debts as compared to the industry by more than 3 times. Thus the company is too much levered as compared to the industry it belongs to. The interest coverage ratio is also lower than the industrial average. These have a negative impact on the company.

e. Investment ratios

The company is having low dividend yield and earnings per share but a high P/E ratio that means the company is overpriced as compared to other companies in the industry.

Financial Analysis: Answer 8

The company overall performance is satisfactory but the main matter of concern is the high debts in the company. Though the past trends show that the company is constantly working to reduce such high debts and also the current ratio and cash flow are good to ensure that the company will not default its payments when they become due. Otherwise, the company is good in terms of profitability, short term liquidity, and efficiency terms. Thus as an investment opportunity, the company is having a high P/E ratio and return and is not favourable to make fresh investment in the company.

Financial Analysis: Answer 9

The ratio analyses also have some limitations. The main issue with it is that it is done based on the year-end data and does not consider during the year figures thus can easily be manipulated. It also does not take into consideration the qualitative aspects of the company like reputation, goodwill, sustainable development, etc. and only focus on the monetary value.

The method of calculation of some of the ratios also defers from company to company like in the given the calculation of the return of capital employed has been done on the basis of average capital employed whereas some may also calculate the some on the closing capital employed.

Thus the ratio should be used prudently keeping in mind the limitations associated with it.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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