Financial Analysis of a Company: Profitability, Leverage, Efficiency and Liquidity

ACCOUNTING FINANCIAL ANALYSIS
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Profitability
Comment:
It is apparent from the above ratios that the profitability of the company has enhanced from
2012 to 2013 as the values of each of the ratios is higher in 2013 as compared to 2012. The
margin enhancement is seen at all levels including the gross level and the net level. This is a
positive sign for the building as higher profitability implies generation of greater profits on
the same amount of sales of top-line. This leads to increased earnings per share which
eventually leads to share price share and generation of wealth for the shareholders (Arnold,
2015).
Profitability 2
Comment:
From the above ratios, it is apparent that on account of higher profits being generated, the
EPS of the company has seen a significant jump which is positive for the company. However,
the impact of this higher profit generation has not been witnessed in the share price which has
increased only marginally. This may be because the market had already priced the higher
profitability of the next year even in 2012 or because the share price is undervalued in 2013.
Owing to the increased EPS and no corresponding increase in share price, the P/E ratio in
2013 has decreased which is negative for the company (Damodaran, 2015).