Finance Assignment Solution

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
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1FINANCE
Table of Contents
Introduction......................................................................................................................................2
Profitability ratio..............................................................................................................................2
Operating profit ratio...................................................................................................................3
Return On capital.........................................................................................................................3
Liquidity ratio..................................................................................................................................4
Current ratio.................................................................................................................................4
Quick ratio...................................................................................................................................5
Investment related ratio...................................................................................................................5
Interest Coverage ratio.................................................................................................................6
Gearing ratio................................................................................................................................6
Earnings per share........................................................................................................................6
Dividend payout ratio..................................................................................................................6
Price earnings ratio......................................................................................................................7
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................9
Appendix........................................................................................................................................11

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Introduction
The analysis of ratio is used for evaluating several aspects of a
particular company’s financial and operating structure. They help in
maintaining the solvency, profitability, liquidity and efficiency of the
company on a whole. Ratios are compared in various companies working on
same sector for seeing their annual performance and getting an idea on their
comparative valuations.
The use of analyzing ratio in the business management sector is that
they help in summarizing financial data by providing with easier
interpretation of the financial statements (Bodie 2013). They are also
enabling for making qualitative judgment on the financial performance of a
business firm drastically. In this report, an attempt is made to analyze the
financial ratios of BTG Plc for analysing the performance of the company.
Profitability ratio
The financial metrics that are used for accessing the ability of a business in generating
earnings by comparing relevant costs and expenses incurred over a certain time is known as
profitability ratio.
The ratios are helpful in the analysis of the company’s performance that includes
operating margin, profit margin, and return on equity, return on assets, return on investment and
return on sales (Uechi et al. 2015).

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Another aspect of this profitability ratio is that it deals with the overall performance and
efficiency of a company. The ratios are divided in two kinds: Returns and Margins. Ratios
showing margins determine the company’s ability in translating the sales dollar in profit during
various steps of measurement. The returns ratio represents the ability of the company in
measuring overall efficiency and helping in the process of generating returns for their
shareholders.
Gross Profit Ratio
In the year 2016 the Gross profit ratio was 68.54% which marginally decreased to
68.47% in the year 2017. This was because there was increase in the amount of cost of sales and
marginal increase in financial expenses as well.
Operating profit ratio
Another major aspect for a company to run properly is its operating profit margin. It can
be seen that the Operating Profit Ratio of the company has fallen significantly. The operating
profit ratio for the year 2016 was 12.63% which dropped down to 10.08% in 2017. The reason
for such decrease is that the profit after tax for the year 2017 had decreased almost by 50%. The
net profit after tax in 2016 was 60.5 million which decreased to 33.6 million in 2017.
(Damodaran 2016).
Return On capital
Whether the particular company is running at profit or loss can be found by reviewing on
its capital return. The return on capital employed of the company in 2016 was 5.52% which
decreased to 5.02% in 2017. This indicates that the capital resources was not utilized efficiently
by the company.