Relationship Between Liquidity and Profitability of Listed Banks in Ghana
Added on 2020-01-06
13 Pages4923 Words132 Views
Economics
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CORPORATEAWARD PROGRAME1
Table of ContentsINTRODUCTION................................................................................................................................31. Evaluate the finances of this organization highlighting the strengths and weaknesses of their. .3Position............................................................................................................................................32. Provide a justified recommendation as to whether you would consider this organization for a sourcing exercise for facilities management services emphasizing any limit that should be placedon the financial exposure (maximum contract value)......................................................................6CONCLUSION...................................................................................................................................11REFERENCES...................................................................................................................................122
INTRODUCTIONIn the present age of globalization, cross boarder transactions are increasing at very fasterrate. It makes it possible for the businesses to take services of overseas suppliers who are offeringqualitative services at cheaper rates. Supplier appraisal is the process through which companiesevaluate and assess suitability and capability of their suppliers and select the best among them. Itwill helps company to meet customer needs and demands timely and effectively. Present projectassignment address the process of supplier appraisal in the business. Moreover, the report willdemonstrate various sources of information that are available to suppliers to take their creditdecisions. Along with this, given financial statement will be evaluated to assess the financial,commercial or technical capabilities of potential suppliers in the sourcing process. Furthermore,ratio analysis method will be applied to assess profitability, liquidity, gearing and investment ratioso that better decisions can be taken to improve future performance.1. Evaluate the finances of this organization highlighting the strengths and weaknesses of theirPositionFinancial statement comprises both profitability statement and balance sheet which helps torepresent profit or loss and financial position of the business. In context to given scenario, financialstatement will be analyse through using ratio analysis (Yue-rong, 2010). It helps to evaluate andexamine business performance so as to take better decisions to enhance potential performance of thebusiness. Calculation of financial ratios of the organizations Ratios Formula 20142013Profitability ratios Gross profit ratio Gross profit / net sales*10036761/161438*100= 22.77%25622/138276*100= 18.53%Net profit ratio Net profit / net sales*1002672/161438*100= 1.65%1352/138276*100= 0.98%Operating profit ratioOperating profit /netsales*1004200/161438*100= 2.60%1362/138276*100= 0.98%Return on capitalemployedNet income/ ownerscapital 2672/4206*100= 63.53%1352/4231*100= 31.95%Liquidity ratios Current ratio Current assets / currentliabilities (726+35975+12253)/43524 = 1.12:1(1446+30457+5483)/33842 = 1.10:13
Quick ratioCurrent assets exceptstock / currentliabilities (35975 +12253)/43524= 1.10:1(30457+5483)/33842= 1.06:1Efficiency ratios Total assets turnoverratio Sales/ Total assets 161438 / 51882= 3.11138276/40524 = 3.41Fixed asset turnoverratio Sales/ Total fixed assets 161438/2928= 55.14138276/3138= 44.06Debtors turnover ratioTotal creditsales/debtors 161438/(35975+30457)/2= 3.15 times138276/30457= 4.54 times Creditors turnover ratio Total creditpurchase/creditors 124677/(43524+33842)/2= 2.06 times 112654/33842= 3.33 times Gearing ratio Debt-equity ratio Debt/equity 73/4206= 0.017111/42310.026Profitability ratios: This ratio examine business profit that has been generated fromhistorical trading functions. Profit is the excess or surplus of generated incomes over businessexpenditures while loss is the result of excessive spendings. Gross profit, net profit and operatingprofit ratio are the most often and common used ratios in practice. Gross profit indicates the surplusof business turnover over cost of sale (Xiao-bing, 2012). With reference to the present scenario, inthe year 2013, GM was 18.53% which get improved to 22.77%. high turnover from £138276 to£161438 is the reason for high GM. It may be caused due to growth in market demand, less sellingprices and effective control over direct cost. On contrary to it, net profit indicates the excess of business turnover after meeting all thedirect as well as indirect business expenditures whilst operating profit is the result of all theoperating functions. In the year 2013, both NM and OM was 0.98% get improved to 1.65% and2.60% respectively (Wu, Rossetti and Tepper, 2015). Rising trend in profitability ratios from £1352to £2672 is a good sign. It may be due to increase in consumer demand and less offering prices.Moreover, return on capital employed measure the profit percentage on total shareholder'sinvestment. It has been increased from 31.95% to 63.53% due to larger the net earnings. Thus, itcan be said that company is performing well as compare to PY 2013. But still, in both the years,there is a huge difference in GM and NM. It reflects that firm is not maintaining an effective control4
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