ROCE 2008
ROCE= PBIT × 100
CAPITAL EMPLOYED
Capital employed= total assets-current liablities
= 43507-2333
= 41174
Roce= 38183 × 100
41174
Roce= 92.73%
Roce 2009
Roce=pbit × 100
Capital employed
Capital employed=total assets-current liablities
=60337-4307
=56030
Roce= 52501 × 100
56030
roce= 93.70%
ROCE 2010
Roce= pbit × 100
Capital employed
Capital employed= 79771-6042
=73729
Roce=66819.76 × 100
73729
= 90.62%
Rona 2008
Rona=pbit × 100
Capital employed(inc longterm loans)
Capital employed= total assets-current liablities(inc longterm loans)
=43507-2333
=41174
Rona=38183 × 100
41174
= 92.73%
Rona 2009
Capital employed= 60337-4307
=56030
Rona=52501 × 100
56030
= 93.70%
Rona 2010
Capital employed= 79771-9033
= 70738
Rona=66819.76 × 100
70738
=94.46%
Rota 2008
Rota= pbit × 100
Total assets
Total assets= current assets + fixed assets
Total assets= 43507
Rota= 38183 × 100
43507
= 87.76%
Rota 2009
Total assets= 60337
Rota=52501 × 100
60337
= 87.01%
Rota 2010
Total assets= 79771
Rota= 66819.76 × 100
79771
= 83.76%
Asset turn over 2008
Asset turnover = sales
Net assets
Net assest = total assets-total libalities
= 43507-2333
= 41174
= 381828.2632
41174
= 0.93%
Asset turnover 2009
Asset turnover= sales
Net assets
= 601379.515
56030
= 10.73%
Asset turnover 2010
Asset turnover= sales
Net assets
= 830476.5
70738
= 11.74%
Netprofit margin 2008
Netprofit margin= pbit × 100
Sales
= 66819.76 × 100
381828.2632
= 17.49%
Netprofit margin 2009
Netprofit margin= pbit × 100
Sales
= 52501 × 100
601379.515
= 8.73
Netprofit margin 2010
Netprofit margin= pbit × 100
Sales
Netprofit margin= 66819.76 × 100
830476.5
= 8.04
Gross profit margin 2008
Gross profit margin = gross profit × 100
Sales
= 76366 × 100
381828.2632
= 20.00%
Gross profit margin 2009
Gross profit margin = gross profit × 100
Sales
= 100230 × 100
601379.515
= 16.66%
Gross profit margin 2010
Gross profit margin = gross profit × 100
Sales
= 124094 × 100
830476.5
= 14.94%
Gross profit markup 2008
Gross profit markup= gross profit × 100
Cost of sale
= 76366 × 100
305462.6106
= 25%
Gross profit markup 2009
Gross profit markup= gross profit × 100
Cost of sale
= 100230 × 100
501149.596
= 20%
Gross profit markup 2010
Gross profit markup= gross profit × 100
Cost of sale
= 124094 × 100
706382.3
= 17.56%
Current ratio 2008
Current ratio = current assets
Current liablities
= 40845
2333
= 17.50%
Current ratio 2009
Current ratio = current assets
Current liablities
= 57555
4307
= 13.36%
Current ratio 2010
Current ratio = current assets
Current liablities
= 76750
6042
= 12.70%
Acid test ratio/ liquid ratio 2008
Asset test ratio = current assets-stock
Current liablities
= 40097
2333
= 17.19%
Acid test ratio/ liquid ratio 2009
Asset test ratio = current assets-stock
Current liablities
= 56060
4307
= 13.02
Acid test ratio/ liquid ratio 2010
Asset test ratio = current assets-stock
Current liablities
= 73759
6042
= 12.21%
Debtor ratio 2008
Debtor ratio = trade debtor × 365
Total credit sale
= 1495 × 365
381828.2632
= 1.429 days
Debtor day 2009
Debtor ratio = trade debtor × 365
Total credit sale
= 3140 × 365
601379.515
= 1.905 days
Debtor day 2010
Debtor ratio = trade debtor × 365
Total credit sale
= 7178 × 365
830476.5
= 3.15 days
Creditors day 2008
Creditors days= trade creditors × 365
Total purchase
= 1675 × 365
305462.6106
= 2.0 days
Creditors day 2009
Creditors days= trade creditors × 365
Total purchase
= 3350 × 365
501149.596
= 2.43 days
Creditors day 2010
Creditors days= trade creditors × 365
Total purchase
= 4965 × 365
706382.3
= 2.56 days
Stock turnover ratio 2008
Stock turnover = cost of sale
Stock
= 305462.6106
748
= 408.37
Stock turnover 2009
Stock turnover = cost of sale
Stock
= 501149.596
1495
= 335.21
Stock turnover 2010
Stock turnover = cost of sale
Stock
= 706382.3
2991
= 236.17
Stock turnover ratio(in days) 2008
Stock turnover(indays) = stock × 365
Cost of sale
= 748 × 365
305462.6106
= 0.89 days
Stock turnover ratio(in days) 2009
Stock turnover(indays) = stock × 365
Cost of sale
= 1495 × 365
501149.596
= 1.088 days
Stock turnover ratio(in days) 2010
Stock turnover(indays) = stock × 365
Cost of sale
= 2991 × 365
7063823
= 1.55 days
Gearing ratio 2010
Gr = all longterm loans + normal overdrafts × 100
Capital reserves or share holders fundor ordinary share+reserve
= 2991 × 100
70738
= 4.22%
For the year 2008 and 2009 the gearing ration will be zero.
Activity ratio 2008
Activity ratio = debtors × 365
Creditors
= 1495 × 365
1675
= 325.77 days
Activity ratio 2009
Activity ratio = debtors × 365
Creditors
= 3140 × 365
3350
= 342 days
Activity ratio 2010
Activity ratio = debtors × 365
Creditors
= 7178 × 365
4965
= 527.6 days
Cash operating cycle 2008
C o c = debtors day + inventory held days – creditors day
C o c = 1.429 + 0.89 -2.0
C o c = 0.32 days
Cash operating cycle 2009
C o c = debtors day + inventory held days – creditors day
C o c = 1.905 + 1.088 – 2.43
C o c = 0.56 days
Cash operating cycle 2010
C o c = debtors day + inventory held days – creditors day
C o c = 3.15 +1.55 + 2.56
C o c = 2.140 days
Working capital to sales 2008
Working capital = working capital
Sales revenue
Working capital = current assets – current liablities
= 40845 – 2333
= 38512
= 38512
381828.2632
= 0.10 × 100
= 10.08%
Working capital to sales ratio 2009
Working capital = working capital
Sales revenue
Working capital = current assets – current liablities
= 57555 – 4307
= 53248
= 53248
601379.515
= 0.085 × 100
= 8.85%
Working capital to sales ratio 2010
Working capital = working capital
Sales revenue
Working capital = current assets – current liablities
= 76750 – 6042
= 70708
= 70708
830476.5
= 0.085 × 100 = 8.51%
Introduction
Ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company’s financial statement. “the relationship of one item to another expressed in simple mathematical form is called ratio”(kennedy and macmillan). Raios are calculated from current year numbers and are then compared to previous year,other companies or even the economy to judge the performance of the company. Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors are shown in a series of statement. There are four types of ratio analysis 1. investors ratio 2. analysis of management performance 3. liquidity ratio 4.gearing ratio.
Roce.
A border measures the return on shareholder’s equity in the ratio which measures the performance of a company as a whole in using all sources of long term finance. Roce is often seen as a measure of management effincy. This ratio is a measure of how well the longterm finance is being used to generate operating profit. Roce formula is :
ROCE= PBIT × 100
CAPITAL EMPLOYED
A roce of 15% suggests that the firm uses everyone pound of capital to generate profit of 15p.
Rota
Calculating the return on total assets is another variation on measuring how well the assets of the business are used to generate operating profit before deducting interest and tax. Its formula is:
Rota= pbit × 100
Total assets
Gross profit margin
The gross profit margin concentrates on cost of making goods and services ready for sale. Small changes in this ratio can be highly significant. There tends to be a view that there is a normal value for the industry or for the product that may be used as a benchmark against which to measure a company’s performance. Its formula is:
Gross profit margin = gross profit × 100
Current ratio
The current ratio indicates the extend to which short term assets area avialable to meet short term liablities. Companies which generate cash on a daily basis such as retail stores can therfore operate a lower current ratio. Manufacturing businesses which have to hold substantial stocks would operate on a higher current ratio. Its formula is:
Current ratio = current assets
Current liablities
Acid test ratio
In the crises where the short term creditors are demanding payment the possibility of selling stock to raise cash may be unrealistic. The acid test ratio takes a closer look at the liquid assets of the current ratio omitting the stocks. Its formula is:
Asset test ratio = current assets-stock
Current liablities
Stock holding period
The stock holding period measures the average period during which stocks of goods are held before being sold or used in the operations of the business. It is usually expressed in days which is why the figure of 365 appears in the formula.stock days measures the same thing as stock turnover but it calculated in a way that puts it on a more similar basis to debtors days and creditors day. Stock days is a useful number because it makes easier to see how changes in stock days, debtors day and creditors day combine to change the working capital ratio. Its formula is:
stock × 365
Cost of sale
Debtors day
The debtors collection period measures the average period of credit allowed to credit customers. An increase in this measure would indicate that a company is building up cash flow problem although an attempt to decrease the period of credit allowed might deter customers and cause them to seek a competitor who gives a longer period of credit. Its formula is:
Debtor ratio = trade debtor × 365
Total credit sale
Creditors day
It measures the average period of credit taken from supplier of goods and services an increse In this measure could indicate that the company is taking longer to pay supplier has allowed a longer period to pay. Its formula is:
Creditors days= trade creditors × 365
Total purchase
Gearing ratio
It measured the proposition of share capital to loan capital. A high gearing ration suggests high proposition of loans to share capital. Gearing ratio is important in looking at a firms capital structure and the impact of interst rate changes. From the balance sheet prospactive the gearing measures considers the relative proportions of longterm loans and equity in the long term financing of business. Its formula is:
Gr = all longterm loans + normal overdrafts × 100
Capital reserves or share holders fundor ordinary share+reserve
Working capital
It shows the stocks purchased on credit then sold to customers who eventually pay cash. The cash is used to pay suppliers and the cycle starts again. It represents the long term financing needed to cover current assets that are not matched by current liabilities
Activity ratio
An indicator of how rapidely a firm converts accounts into cash or sales. In general the sooner the management can convert assets into sales or cash the more efficent the form is running. Its formula is
Activity ratio = debtors × 365
Creditors
Gross profit markup
Gross profit margin is a bit different from gross profit mark up.gross profit margin refers to a companys profit as a percentage of its total revenue. Mark up is more informal it is usually used to refer to the difference,say, a whole seller and retail price. For example if you manufacture an office chair sell them to dealer for 50 pounds each and the dealer sell them for 70 pounds each so this 20 pound is a mark up. Its formaula is
Gross profit markup= gross profit × 100
Cost of sale
Asset turnover
Asset turn over measures the effincy with which a company is utilizing its assets to generat the sales. Is formula is
Asset turnover = sales
Net assets
Net profit margin
The net profit margin ratio tells us the amount of net profit per one pound of turnover a business has earned. This is after taking amount of the cost of sale, the administration cost, selling and distribution cost and all other costs the net profit is left. Out of which they will pay interst and tax and so on. Its formula is:
Netprofit margin= pbit × 100