Accounting Financial Analysis Report

Running head: ACCOUNTING FINANCIAL ANALYSIS REPORT
Accounting financial analysis report
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ACCOUNTING FINANCIAL ANALYSIS REPORT
Table of Contents
1. Introduction:.............................................................................................................................2
2. Analysis and interpretation..........................................................................................................2
2.1 Profitability ratio........................................................................................................................2
2.2 Liquidity ratio............................................................................................................................5
2.3 Efficiency ratio..........................................................................................................................7
2.4 Gearing ratio..............................................................................................................................8
3. Conclusion:..................................................................................................................................9
4. Recommendation:......................................................................................................................10
References list:...............................................................................................................................11

ACCOUNTING FINANCIAL ANALYSIS REPORT
1. Introduction:
The report is prepared to evaluate the financial performance of Thomas T enterprise
using the tool of ratio analysis using the figure of two years. In order to provide the better
assessment of the performance of the company, the results obtained on the efficiency,
profitability and gearing position has been compared with the industry benchmark. Investors rely
on the figures to make investment decision by judging the efficiency of the company in terms of
operations and utilization of the assets and comparing the trends over a period. The ability of
company to generate earnings and the profitability position along with the ability to utilize the
money of shareholders can be evaluated with the help of ratio analysis (Legenzova, 2016). In
addition to this, business risk can be assessed using the ratio. Therefore, it is said that ratio
analysis is an important tool for investors as well as management in their decision making
process.
2. Analysis and interpretation
2.1 Profitability ratio
The profitability position of Thomas T enterprise has been evaluated by computing gross
profit, net profit, return on equity and return on total assets.
2.1.1Gross profit

ACCOUNTING FINANCIAL ANALYSIS REPORT
Gross profit of Thomas T enterprise has reduced in the current year and it is higher than
the industry standard. This fall in gross profit is attributable to fall in the sales value. However,
the percentage of gross profit is considerably beyond the industry average at 22%.
1
48.00% 50.00% 52.00% 54.00% 56.00% 58.00% 60.00% 62.00%
Gross Profit
Series2 Series1
2.1.2 Net profit
Net profit has fallen from 40% to 20% in the current year, which implies that the affairs
of the business is not being managed efficiently. However, when comparing the figure with
industry average at 3%, it is observed that the profits generated is beyond the industry standard
(Nielsen & Roslender, 2015).