Finance: Financial Ratios and Tax Essay

Submitted By qazwsx6437
Words: 3042
Pages: 13
Open Document
Introduction
Financial analysis is the process or critically examining in detail, accounting information given in financial statements and reports. It is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of a firm’s performance. The measurement and interpretation of business performance is done through the use of ratios. The financial statements published by companies are too general to be used by the various stakeholders and hence ratios are used to highlight the different aspects of business operations. Therefore, I here by undertake to take a critical analysis of this data, and with your permission, I shall give a detailed analysis on the aspect pertaining HMV Group Plc’s financial position to enhance management to come up with a concrete and viable decision. Financial ratios are used to evaluating the ability of the firm to meet its short term financial obligation as and when they fall due. Also, it helps to interpret the performance of the firm over the period covered by the financial statements and for comparison of performance of the firm. This can be done in the following ways; first, cross sectional analysis of the performance of the firm in question is compared with that of individual competitive firms in the same industry. On the other hand Trend/time series analysis of the firm’s performance is evaluated over time. These analyses are also used for predicting future performance of the firm during a specified time flame in which the business was in operation. Further, to establish the efficiency of assets utilization to generate sales revenue during the year. Finally, to establish the extent which the assets of the firm has been financed by fixed charge capital.

Q1,
Profitability
Profitability ratios evaluate the firm’s earnings with respect to a given level of sales, a certain level of assets, the owner’s investment, or share value. Evaluating the future profitability potential of the firm is crucial since in the long run, the firm has to operate profitably in order to survive. The ratios are of importance to long term creditors, shareholders, suppliers, employee’s and their representative groups.
From the Appendix 1, we can see, From 2009 to 2012 the return on capital employed gradually reduced from 43.45% to -25.82%. Only 2011 of the ROCE were 9.61% belonged to the average return. In 2009 and 2010 the ROCE belonged to high return (over11 %), shareholders would earn residual income, value-added. 2012 belonged to low return (under 6%), shareholders would have value loss. Tells us how much profit we earn from the investments the shareholders have made in their company.
With regard to return on assets, From 2009 to 2012, indicators gradually decreased from 11.13% to -5.86%. Showed that the enterprise asset utilization effect worse and worse, the enterprise did not got a good performance on revenue increasing and money saving.
The next is Asset Turnover. From 2009 to 2011, the Asset Turnover gradually reduced from 3.17 to 2.17.This showed that the enterprise's total assets turnover speed was getting slower, sales ability was more and more low, asset utilization efficiency was more and more low. the Asset Turnover Suddenly rose to 3.41 in 2012, that indicates the the utilization efficiency of each asset was improved by the company, hence the sale’s revenue was also increased.
The company's sales margin from 2009 to 2012 is gradually reduced, indicating that the profitability of the enterprise itself gradually reduced. This may be due to higher corporate expenses due to cost. 2009 and 2010 net sales Average Benchmark is still within the scope of CIMA, which shows the first two years of the time, though reduced, but the company's profitability is still relatively good.
Gross profit margin (gross profit margin): After the company's gross margin from 2009 to 2010, a growing trend, but from 2010 to 2012 show a downward trend, indicating a slight
Show More

Related Documents: Finance: Financial Ratios and Tax Essay

Managing Financial Resources and Decisions Essay

Managing Financial Resources & Decisions By: * * Introduction Top of FormBottom of Form | In this report we are going to help Mr T Jones to start his fast food restaurant in Manchester. Mr T. Wants to start a franchise restaurant Wimpy and needs help with the financial resources and planning part. Step one, there are different souses of finance and it’s divided into internal and external finance, money that comes from within a company and the…

Words 4727 - Pages 19

Finance for Leisure and Tourism Essay

Finance for Leisure and Tourism AC2030N Autumn semester Cristina Prodan (ID 10047491) Contents Abstract 3 Profit and Loss Account 4 Balance Sheet 5 Accounting concepts 6 Cash flow 7 Financial rations analysis 8 Types of finance 10 Financial and non-financial risk factors 11 Reference 12 Abstract This report was commissioned by Mr Camlegg, and it focuses on explaining the main issues considered when preparing the financial statements. The financial statement is for a small…

Words 1480 - Pages 6

Essay On Managing Financial Resources And Decisions

ICON College of Technology and Management BTEC Edexcel Level 5 in Business (QCF) Unit – 2: Managing Financial Resources and Decisions (QFC. L4) Submitted to: Submitted by: Student Id: Date: Table of Contents Introduction…………..…page .3 Task 1 (LO1) --- page .4 Task 2 (LO2) --- page .6 Task 3 (LO3) --- page .9 Task 4 (LO4) --- page .12 Conclusion……………...page References.......................page Introduction For this assignment…

Words 3826 - Pages 16

Essay on Business Sheets

Loss Profit and Loss sheet- “A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year.” This explains that a profit and loss sheet is a financial statement that summarises all the costs of the business at a certain period of time. It can vary from a week’s worth of expenses to months and years. Sole traders with small businesses are more likely to have a week’s worth of financial record whereas big PLC’s like…

Words 931 - Pages 4

Ratio Analysis of Domino's Pizza Essay

PIZZA UK & IRL FINANCIAL PERFORMANCE ANALYSIS] | Submitted as a part of module assessment for Accounting and Control | CONTENTS: Page Number 1. INTRODUCTION 2 1.1 DOMINO’s at LONDON STOCK EXCHANGE And Trading Information 2 2. FINANCIAL RATIO ANALYSIS ON DOMINO’s PIZZA UK & IRL PLC’s PERFORMANCE 3 3.1 PROFITABILITY RATIOS 3-4 3.2 LIQUIDITY RATIOS 5-6 3.3 EFFICIENCY RATIOS 7-8 3.4 GEARING RATIOS 9-10…

Words 5037 - Pages 21

Business Studies - Finance Essay examples

Finance [pic] Strategic plan: encompasses the strategies that a business will use to achieve its goals. Financial Resources: resources in a business that have monetary or money value. Financial management: is the planning and monitoring of a business’s financial resources to enable the business to achieve its financial goals. Assets: are the property and other items and effects of a business, such as business premises, machinery, vehicles and cash (tangible assets) and patents, trademarks…

Words 3663 - Pages 15

Generally Accepted Accounting Principles and Financial Statements Essay

hardware student performance for the financial year 2013 and 2012 has been generated and critically analyzed for the purpose of this report. Literature briefing has been described on the sources of finance available to an organization. Advantages and disadvantages of the sources available is discussed further to find out whether that particular finance is correct or not. Income statement and a statement of financial position were extracted from the data provided. Financial calculation of company regarding…

Words 1314 - Pages 6

the last ride Essay

Finance Principles - Homework #1 Dr. Choi (Due: Tuesday, February 11) All answers must be typed. Show all of your work for numerical problems. ** Homework must be done independently.** “I attest that this is my own work and that I have abided by the Howard University Code of Student Conduct. I have neither given nor received any type of help, except as specifically permitted by the professor.” 11/11/14 Student’s Signature Date 1. Define or explain each of words and phrase…

Words 1820 - Pages 8

Essay on FINANCE 1

INTRODUCTION: This Study shows that how various methods and tools like financial ratios are being used in analysing the financial position of a company, as per market value and as well as the assets value of a company. This study also shows that weather the company is efficiently managed or not with the help of Financial ratios, in order to ascertain that company is worth acquiring or not. Here, the company taken into the consideration is British Airways. British Airways is one of the leading airlines…

Words 1532 - Pages 7

W1 Problem Set Essay

jurisdictions against the seizure of its property. Berk, J., & DeMarzo, P. (2014). Corporate Finance, 3rd Edition. Upper Saddle River: Pearson Learning Solutions. (p. 05) 2. What does the phrase limited liability mean in a corporate context? It means that the investors (or owners) have their liabilities restricted to the amount of the investment in the company. Berk, J., & DeMarzo, P. (2014). Corporate Finance, 3rd Edition. Upper Saddle River: Pearson Learning Solutions. (p.05) 3. Which organizational…

Words 1657 - Pages 7