Lecturer: Owen Lewis
1 Introduction 5
1.1Analysing Financial Health using Ratios 5
1 Financial Ratios And Analysis 7
1.1 Profitablity 7
1.1.1Margin Ratios 7
1.1.2Return Ratios 9
1.1.3Futher Comment 10
1.2.1Current Ratios 11
1.2.2Quick Ratios 11
1.1.3Futher Comment 12
1.3 Efficiency 14
1.3.1Fixed Assets Productivity 14
1.3.2Debtors Collection Period 14
1.3.3Creditors Payment Period 15
1.3.4Stock Turnover in days 15
1.3.5Working Capital Turnover 15
1.3.6Cash Operating Cycle 16
1.3.7Futher Comment 16
1.4 Investment 17
1.4.1Earnings Per Share 17
1.4.2Dividend Cover 17
1.4.3Dividend Yield 18
1.4.4Market Share Price 18
1.4.5P/E Ratio 18
1.4.6Futher Comment 19
1.5 Gearing 20
1.5.2Interest Cover 20
1.5.3Futher Comment 20
2 Recommendation 21
1Capital Investment Appraisal Calculations 22
1.1Project A and B 22
1.2Appraisal Summary Table 24
2 Evaluation of Appraisal Methods 24
2.1Discounted Payback Period 24
2.2Net Present Value 25
2.3Internal Rate of Return 25
3 Recommendation 26
4 Other Considerations 26
5 Capital Retioning of Project A and B 27
6 Summary 27
1.1Appraising Capital Investment Projects 28
1.2Comments on ways of overcoming the difficulties 29
Conclusion 30 bibliography 31
Jaycee PLC is a business quoted on the stock exchange manufacturing electronic components for sale to the audio/ visual industry. It has provided you with financial information from the previous four years, together with comparisons with a similar sized business and the business sector norm. It has also included details of its investment plans for the future.
1.1 Analysing Financial Health using Ratios
To examine the financial health of Jaycee PLC we will use financial ratios to find out its financial condition and performance.
Profitability ratios: How profitable is this business?
Liquidity ratios: How quickly company can pay its debts?
Efficiency ratios: How quickly is the cash cycle operating?
Investment ratios: How good an investment it is for shareholder?
Gearing ratios: Shows the balance between equity and debt financing.
Some methods of calculations to help us with our analysis by using the date from a similar sized competitor and the business sector norm for comparative purposes. Using these figures to highlight the financial strengths and weaknesses of Jaycee PLC, also draw attention to any trends. Yet the report cannot give the exact reasons, only provide suggestions and recommendations.
1. The financial data are reliable and accurate of Jaycee PLC.
2. It does not consider inflation in these findings. Also readers know it may cause distortion.
3. Readers realize ratios only an assistant in financial figures from company accounts. Also it should do further investigation before making decision.
4. Comparison is not like-for-like. It exist other factors may exist the figures.
5. There are no seasonal trends and peak for Jaycee PLC.
1. Financial Ratios And Analysis
This part will discuss and analyse the financial ratios which include profitability, liquidity, efficiency, investment and gearing for Jaycee PLC. The calculation method of each ratio are typical, but it also exist other ratios and variation of these ratio’s calculation method. Also including the comment for each section.
Profitability ratios will help us to determine the company’s bottom line and its return to its investors. These ratios show Jaycee PLC overall efficiency and performance. Also they can divide to two types: margins and returns.
1.1.1 Margin ratios
Margin ratios represent the company's ability to translate sales into profits at various stages of measurement.
Gross Profit Margin
The gross profit ratios looks at cost of goods sold as a percentage of sales. This ratio looks at how well Jaycee PLC controls the cost of its inventory