Evaluating Business Performance of T Plc based on Industry Averages

BUSINESS PERFORMANCE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Evaluating performance of T Plc by taking into consideration of industry averages..................1
REFERENCE...................................................................................................................................4

INTRODUCTION
Business performance depicts capacity of business in generating profits. If business is
generating more profits than its performance is good and if profit is less than compared to what
is expected then business performance is bad. This report will evaluate the performance of T Plc
on the basis of industry average. Further will also suggest that investors should invest in this
company or not.
MAIN BODY
Evaluating performance of T Plc by taking into consideration of industry averages.
By seeing the ratios of T Plc it can be said that gross profit margin of company is
increasing which is good as back in 2018 it was 39 then in the year 2019 and 2020 it has reached
to 40 (Rashid, 2018). by observing industry averages which is 37 it can be said that T plc is
ahead because its competitors are making 37 gross profit, but they have reached to 40. this
shows that managers of the company are efficiently managing the business operations. Net profit
margin of company is also increasing in 2018 it was 5.8, in 2019 it was 5.9 and in 2020 it was
6.05. So by seeing this it can be said that company is growing because industry average is 4 and
net profit margin of T plc is more. It will also attract more investors because company is
generating enough profit. Return on shareholder's funds which is the profitability ratio is also
increasing from 15 to 16% whereas the ratio of their competitors is only 12%. ROE which range
between 15-20% is good and T Plc ranges under this percentage range only. The ideal current
ratio is 2:1 but the current ratio of T Plc is decreasing and does not comes in range of ideal ratio
(Brown, 2018).
In 2018 it was 1.1:1, in 2019 it was 0.95:1 and in 2020 it comes to 0.8:1. whereas
industry average is 1.05:1 which also not falls under ideal current ratio but it is better than what
T Plc is performing. It shows that liquidity of company is poor. Ideal quick ratio of the company
is 1:1. In case of T plc it has always less than 1 quick ratio which means that company is not
efficient to pay to its current liabilities. In 2018 it was 0.65:1 then in 2019 it was 0.55:1 and then
in 2020 it has decreased to 0.4:1. Quick ratio of T plc is continuously decreasing which is not the
right thing for the company. Inventory holding days of T Plc in 2018 was 13, in 2019 was 12
and in 2020 it again came to 13 whereas industry average is 19 days. Here T plc is at winning
situation because if company hold inventory for long time then it is required shows that money
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