Financial Analysis of Croda International Plc

Running Head: Financial Analysis
Financial
Analysis
[Type the document subtitle]
Laptop04011
[Pick the date]

Financial Analysis 1
Contents
Financial Performance of Croda International Plc..........................................................................1
Recommendation of Initiative to Improve Company’s Position.....................................................5
Evaluation of Company’s Shares.....................................................................................................7
Advise to Colleague.........................................................................................................................8
References........................................................................................................................................9

Financial Analysis 2
Financial Performance of Croda International Plc
Interpretation of ratios
 Profitability Ratio
2016 2017 2018
0
2000
4000
6000
Profitability Ratio
Revenue
Net profit
The profit margin ratio is also known as the return on sales ratio that elaborates about the net
income earned by the company in respect of number of sales generated by the business by
equating with the net income with sales. The profit margin ratio tells that what is the percentage
of sales that is left with the company above all the expenditures that are paid by the business.
Further, analysing the ratio of the company, it should be elaborated that the net margin ratio of
the company is increasing constantly from 2016 to 2018, thus the revenue of the business Croda
International is managing the expenses. This states that revenue attained with the company is
more while the expenses are less (Zainudin, and Hashim 2016).
The return on equity ratio refers to the ratio that measures the capability of the organization to
generate profits from the shareholder’s investment in the business. This ratio tells that how much
profit an equity share generates in the business environment. The ROE measures that how
efficiently an organization can utilize the money from shareholders to create profits for the
business. The profitability ratio of the company Croda International states that the return on
equity is decreasing with the coming time as it came down to 24.04% in 2018 from 32.78% in
2016. This means that the profit level of the organization is reducing over its equity shared in the
market (Kim, and Im 2017).
 Liquidity Ratio

Financial Analysis 3
2016 2017 2018
0
5000
10000
15000
Liquidity Ratio
Current assets
Current liabilities
The liquidity ratio of the business tells about the current liquid position of the business to handle
day-to-day functions effectively. Further, the current ratio explains the capability of the
organization to pay its debts that are for a shorter period of time. The current ratio helps in
settling the short term liability of the company effectively. Best current ratio for a company is
between 1.2 to 2. The current ration of Croda International in year 2016 was 1.94 which means
that the company has 1.94 times more current assets than current liabilities (Mohanram, Saiy,
and Vyas 2018).
The quick ratio analyse the capability of the business to pay to its current liability by using only
the quick assets available with the company. The quick asset refers to the current asset that does
not include the amount of inventory in it. These are the assets of the company that can become
liquid within 90 days or a short period of time. The company Croda International had best quick
ratio in the year 2016 that is 1, further, the quick ratio was optimum in the subsequent years as
well. Thus, it should be noted that the quick ratio of the business Croda International elaborates
that the company is continuously maintaining the optimum working capital requirement in the
business environment (Rani, Yadav, and Jain 2015).
 Solvency Ratio
2016 2017 2018
-
0.50
1.00
1.50
Solvency Ratios
Debt/ Equity
Debt/ Total assets