lecture45m17-ratioanalysisandcontinentalre-wenkub
2023-01-30 08:32:16 本頁(yè)面
【正文】 order to make use of ratios we must have something to pare them against Limitations of ratio analysis ? Financial statements are historic in nature (backward rather than forward looking / out of date) ? Comparison of results made difficult by: – Use of different accounting policies – One off items that distort results (eg: large bad debt, restructure, redundancy) ? Definition used (eg: ROCE, Gearing, capital employed) ? Year end balances not always representative of period as a whole (eg: high inventory levels before Xmas) ? Ratio analysis may indicate problems, it won’t necessarily remend solutions Interpretation technique ? Suggest reasons why performance has improved / declined ? Use ratios to support your analysis ? Make use of financial statements provided as well as ratios (eg: make up of Current assets / liabilities is often more useful than the current ratio / acid test) ? Make remendations based on your analysis ? State any limitations / further information needed ? It is not necessary to calculate every ratio Interpretation of financial statements using ratio analysis Detailed example Continental Restaurants plc Annual % change in revenue Formula Revenue in 20X5 – Revenue in 20X4 x 100 Revenue in 20X4 Annual % change in revenue Calculation 20X4 7,026,484 – 6,566,805 x 100 = % 6,566,805 20X5 8,422,157 – 7,026,484 x 100 = % 7,026,484 Annual % change in revenue Comments ? Revenue during 20X5 was % higher than 20X4 ? Growth due to: –Opening of two new restaurants –Existing restaurants being established and gaining loyal customer base Profitability ratios Gross profit margin (%) Formula = Gross Profit x 100% Revenue Gross profit margin (%) Calculation 20X4 = 4,279,904 x 100% = % 7,026,484 20X5 = 5,211,238 x 100% = % 8,422,157 Gross profit margin (%) Comments ? Only takes into account cost of sales (eg: food costs) ? In 20X5, for every 163。 ? Alternatively for every 163。 was spent on wages and salaries ? Increase on previous year, and this has almost wiped out gains arising from improvement in gross profit margin ? May be due to: – Shortage of skilled labour – Location of new restaurants Return on Capital employed (ROCE) (%) Formula = Profit from operations x 100% Capital employed ? Note: ? Capital employed = shareholders’ funds and LT debt ? Several different definitions of capital employed be consistent ROCE (%) Calculations 20X4 = 1,260,216 x 100% = % 5,078,210 + 750,000 20X5 = 1,513,358 x 100% = % 5,914,134 + 750,000 ROCE (%) Comments ? Indicates how efficiently an anisation utilises the long term fun
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