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Calculation of financial ratios for JMD Ltd

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Added on  2020-10-04

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Computation of financial ratios for JMD Ltd |Preferences |Formula|2017 |2016 |2015 | |Current ratio |Current assets /|2.35 |2.25 |2.01 | ||Current Liabilities|||| || |||| |Acid-test ratio|Liquid assets / |87000 |79500 |62000 | ||Current liabilities|||| || |1.07 |1.02 |0.81 | |Gross profit ratio|Gross profit / net |0.57 |0.55 |0.50 | ||

Calculation of financial ratios for JMD Ltd

   Added on 2020-10-04

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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Part A...............................................................................................................................................11. Computation of financial ratios for JMD Ltd.....................................................................12. Significance of ratios..........................................................................................................23. Recommendation................................................................................................................2Part B...............................................................................................................................................21. Calculation of ratios...........................................................................................................22. Trend line using semi-average method...............................................................................3PART C............................................................................................................................................41. Draw a scatter diagram for the following:..........................................................................42) Draw a bar graph using the equation y = 4x – 2 and the values 1,2,3,4............................63. Represent the following information as a pictogram.........................................................64 How you will validate statistical data in an organisational setting.....................................8What steps would you take to ensure data security. .............................................................8CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................8
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INTRODUCTIONFinancial interpretation shows that how a company is able to analyse its profits and loss.It shows that how organisation develop strategies and take decisions. Financial ratios helps inanalysing the financial position of company. Also, it is useful in identifying weak areas andimproving it. This report will show different types of financial ratios of company.Part A1. Computation of financial ratios for JMD LtdParticularsFormula201720162015Current ratioCurrent assets / Current Liabilities2.352.252.01Acid-test ratioLiquid assets / Current liabilities8700079500620001.071.020.81Gross profit ratioGross profit / net sales * 1000.570.550.50Gross profit percentageSales- COGS (Cost of Goods Sold)/net sales16200016500011000056.84%55.00%50.00%Net profit percentageNet income / sales6.58%10.50%13.64%Asset turnover ratioNet sales / Average total assets9435009000004717504500004470000.600.670.49Debtors collection daysTrade creditors/ Sales*36590.2974.8389.59Inventory turnover daysCOGS / Average inventory19950018750099750937501
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14.8017.2814.432. Significance of ratiosThe financial ratios are calculated of three years which are quite relevant to organisationso that it may be able to analyse financial health and make improvements as well. Current ratioand liquid ratio clarifies about liquidity position and is significant to business in paying off short-term liabilities. Gross profit ratio is used to assess profitability of company in generatingrevenue. Net profit is significant and company should control on its expenditures so that moreprofit can be gained (Siegel and et.al, 2014). Asset turnover ratio assess efficiency of firm ingenerating sales and is significant to it and it should use assets to produce sales. Debtorscollection days ratio is outstanding payment from customers on credit basis. While inventoryratio is useful which analyses how effectively company is using stock to achieve production. 3. RecommendationCurrent ratios in three years are good of JMB Ltd as it is more than ideal ratio of 2: 1.Liquid ratios are good as well. Gross profit ratio is increasing 50 % in 2015, 55 % in 2016 and in2017, it is 56.84 %. Net profit is reduced up to high extent in 2017. It is recommended to JMBLtd to initiate control on its expenses to garner more profit (Roger and et.al, 2012). While, assetturnover ratio is increased which means company is using assets. Payment from debtors isoutstanding and it is recommended to implement strict credit policies. Inventory turnover ratio isgood and organisation is utilising inventory in quick manner to generate desired production. Part B1. Calculation of ratiosFinancial ratios of Norts LtdParticularsFormula20172016EPS (Earnings Per Share)Net income/ Outstanding shares10.00%8.75%earnings yieldEPS/ Market share6.676.732
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