Analyze financial information contained in set of accounts
[ad_1]
Following set of financial statements is used to analyze the financial information:
| ABC Company Limited | |
| Profit & loss account | |
| For the year ended Dec 31, 2016 | |
| Pounds | |
| Sales | 613 633 |
| Cost of sales | (368 180) |
| Gross profit | 245 453 |
| Operating expenses | (134 999) |
| Operating profit | 110 454 |
| Income tax (30%) | (33 136) |
| Net profit | 77 318 |
| ABC Company Limited | ||||
| Balance sheet | ||||
| As on Dec 31, 2016 | ||||
| Pounds | Pounds | |||
| ASSETS | LIABILITIES | |||
| Current assets | Long term liabilities | 662 033 | ||
| Cash and bank | 183 825 | |||
| Accounts receivables | 621 067 | Current liabilities | ||
| Total current assets | 804 892 | Accounts payable | 97 533 | |
| Total liabilities | 759 566 | |||
| Fixed assets | 311 228 | |||
| Total assets | 1 116 120 | OWNER’S EQUITY | ||
| Share capital | 100 000 | |||
| Retained earnings | 256 554 | |||
| Total owner’s equity | 356 554 | |||
| Total liabilities and equity | 1 116 120 |
Performance measures: These measures are used to gauge the financial performance of the business.
| 1 | Return on capital employed (ROCE) | = | Operating profit | |
| Equity + long term debt | ||||
| Return on capital employed (ROCE) | = | 110 454 | ||
| 1 018 587 | ||||
| Return on capital employed (ROCE) | = | 11% | ||
| 2 | Return on equity (ROE) | = | Operating profit | |
| Shareholders’ equity | ||||
| Return on equity (ROE) | = | 110 454 | ||
| 356 554 | ||||
| Return on equity (ROE) | 31% | |||
| 3 | Gross profit margin | = | Gross profit | |
| Sales | ||||
| Gross profit margin | = | 245 453 | ||
| 613 633 | ||||
| Gross profit margin | = | 40% | ||
| 4 | Net profit margin | = | Net profit | |
| Sales | ||||
| Net profit margin | = | 77 318 | ||
| 613 633 | ||||
| Net profit margin | = | 13% | ||
| 5 | Operating profit margin | = | Operating profit | |
| Sales | ||||
| Operating profit margin | = | 110 454 | ||
| 613 633 | ||||
| Operating profit margin | = | 18% |
Financial status measures: These ratios are used to gauge the financial position/health of the business.
| 1 | Current ratio | = | Current assets | |
| Current liabilities | ||||
| Current ratio | = | 804 892 | ||
| 97 533 | ||||
| Current ratio (times) | = | 8.25 | ||
| 2 | Cash ratio | = | Cash balance | |
| Current liabilities | ||||
| Current ratio | = | 183 825 | ||
| 97 533 | ||||
| Current ratio (times) | = | 1.88 | ||
| 3 | Working capital ratio | = | Net working capital* | |
| Current liabilities | ||||
| Working capital ratio | = | 707 359 | ||
| 97 533 | ||||
| Working capital ratio (times) | = | 7.25 | ||
| Net working capital | = | Current assets – current liabilities |
Analysis:
From profitability perspective the company seems to be doing fine as we can see the gross profit margin of 40% and operating profit margin of 18% and net profit margin of 13%.
[Button id=”1″]
[ad_2]
Source link
"96% of our customers have reported a 90% and above score. You might want to place an order with us."
