Comparison of Accounting Ratios of R plc with S plc in Distribution of DVD Recordings

Business Finance

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Calculation of required accounting ratios and comparison with S plc........................................3
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Different tools and techniques are used by institutions to get an insight about how the business is
performing. These tools and techniques helps the business leaders and other stakeholders of a
business in taking various decisions which may be for or against the business. Accounting tools
are one of these and it includes financial ratios analysis, trend analysis, cash flows and changes
in same, horizontal and vertical analysis etc (Aras, and Yildirim, 2018). The following report
highlights a detailed comparison between two firms working in distribution of DVD recordings.
The accounting ratios of S plc have been provided and this report calculates ratios of R plc for
better comparison. The report further discusses the limitations that have been present in the
interpretation.
TASK
Calculation of required accounting ratios and comparison with S plc.
Accounting Ratios refers to the relationship between two or more numerical values taken
from the financial statements of a company. These accounting ratios aids the strategic managers
in implementing new and better policies which would make a business more successful
(Alakaleek and Cooper, 2018). These also helps different stakeholders in comparing the
performance of the business with itself or with other businesses working in same industry.
Following are the ratios of R plc.
Profitability Ratios: These ratios calculates how the business is earning in response to its revenue
from sales.
 Gross profit margin : Gross profit / Net Sales * 100
= 10880 / 26245 * 100
=41.45 %
 Operating profit margin : Operating profit / Net Sales * 100
= 5313 / 26245 * 100
= 20.24 %
 ROCE: Earning before interest and tax / Capital employed
= 5313 / 26245 * 100
= 20.24 %