Essay on Ratio Analysis

The following information is from real financial accounts and the entries which are titled are included under title other are summaries for the entries which are beyond the scope of this module. Therefore you have no need to worry about such issues.

As a consequence of this work done during this session, you may not use Rexam, as your company which you are going to analyse for the assignment. The assignment requires you to analyse the situation of a FTSE 100 company, so there is no similar issue with the use of Yahoo Inc. or Wal-Mart Inc.

Below is information presented for 3 organisations of which you are required to do some form of financial analysis. As a structure, although you have only 2 point references given, you should structure your analysis along the following lines;

• Profitability

o Return on Capital Employed

o Gross Profit Margin

o Operating Profit Margin

o Net Asset Turnover

• Activity Ratio

o Trade Receivables Days / Debtor Days

o Trade Payables Days / Creditor Days

o Inventory Days / Inventory Turnover / Stockholding Period

o Cash Conversion Cycle / Working Capital Cycle

o Net Current Asset Turnover

• Liquidity Ratios

o Current Ratio

o Quick Ratio

• Gearing Ratios

o Debt to Equity Ratio

o Capital Gearing Ratio

o Interest Coverage Ratio

• Investor Ratios

o Return on Equity

o Earnings per Share

o Price Earnings Ratio (Need current Share Price)

o Dividend Pay-out Ratio

During your analysis you should keep in mind some of the limitations which are present when doing the analysis, as this is a key part of your assignment and demonstrates your ability to critically reflect upon the calculation which you have done? Bear in mind any issues which you experience now as these are likely to apply in some degree to your analysis?

|Income Statement for Wal-Mart |As at: 31st January |
| | |2011 |2010 |
|Revenue | | £ 421,849 | £ 408,085 |
| |Cost of Sales | £ 315,287 | £ 304,444 |
|Gross Profit | | £ 106,562 | £ 103,641 |
| |Operating Selling and General Administrative Expenses| £ 81,020 | £ 79,639 |
|Operating Profit | | £ 25,542 | £ 24,002 |
|Interest | | | |
| |Net Interest | £ 2,004 | £ 1,884 |
|Profit Before Tax | | £ 23,538 | £ 22,118 |
| |Tax | £ 7,579 | £ 7,156 |
|Net Income from Operations | £ 15,959 | £ 14,962 |
| |Other Appropriations | £ |-£ 592|
| | |430

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Essay about Ratio and Ratio Analysis