This 6 page paper examines a case study of a fictitious company supplied by the student. The writer undertakes a ratio analysis and answers questions regarding the interpretation of the ratios and meaning of the terms. The bibliography cites 3 sources.
Name of Research Paper File: TS14_TEsamco1.rtf
Unformatted Sample Text from the Research Paper:
be remembered that by the time information can be used in ratios it is already out of date. Therefore ratio analysis may be important, but it is not the only
information that should be used. If we look at Sample Co to considers it performance it looks at first glance as a compnay
that is growing the revenues from sales and the net profit are increasing. However we will look at this in statistical terms. In
2001 the net profit (after interest) was 5.95% against 3,87% in 2000 and 1,03% in 1999. In 2000 there was also an exceptional item, after this there was a net
profit margin of 4.24%. Borrowing has increased we can see this from both the increase in interest payable. A concern will be the affordability of these interest payments; however, these
appear to be well covered with an interest rate coverage of 2.33 in 2001, however it does appear that there were problems in former years, as although there was
coverage rate of 1.53 in 2000 it was only 0.39, giving only a small margin of coverage had interest rates increased of profits dropped.
Investors will be interested on the investment rates of return. With capital employed in 2001 of 6251, in 2000 of 4873 and 4289 this gives us a
return on capital employed of 9.85%, 6.55% and 1.77% respectively. There is a financial leverage multiplier of 7.59, 5.89 and 6.01 respectively for 1002, 2000 and 1999.
In terms of individual shares these figures are already given in the actual case, with a profit per share of 6.07, 3.51 and .77.