This report provides an analysis and compare of the current profitability, efficiency and financial stability of Premier Investments Ltd and David Jones Ltd over last 2 years. Methods of analysis include trend, horizontal and vertical analyses as well as ratios such as Gross Net profit margin, Inventory turnover and Current ratios. All calculations can be found in the appendices. Results of data analysed show that David Jones Ltd have better performance and is more stability than Premier Investments Ltd. In particular, Premier Investments Ltd’s profit had dropped almos half than the year before.The report finds the prospects of both companies in their current position are pretty positive. The major areas of …show more content…
Return on Equity
Return on equity is another measure of profitability, it measure how much return a company can generate by using its equity (Garrison, Noreen & Brewer 2010). Premier Investments’ ROE has decreased from 9.24% in 2010 to 4.35% in 2011. This is a large decrease in the ROE. It means that the investors are likely to get a return of only 4.35% by investing in their company, which is very poor keeping in mind their own historical performance, and the performance of David Jones Limited, as well. David Jones Limited earned an ROE of 22.91% last year, and 2021.45% this year. There has been a slight decline in the return, but overall the return is very good, and far better than Premier Investments return.
Return on Assets
ROA is also a profitability ratio; it reflects the efficient usage of assets by the management. It represents the amount of returns that the company is capable of generating by utilizing its assets (Garrison, Noreen & Brewer 2010). Premier Investments had an ROA of 9.81% in 2010 and 5.72% in 2011. This shows a significant decline in the capability of Premier Investments to generate returns by using its assets. On the other hand, David Jones limited had an ROA of 20.81% in 2010, which has now decreased to 20.39%. This is a very small decrease, and overall the return is very good.
Premier Investments Ltd David Jones