Financial Analysis of The Reject Shop

the Reject Shop
Financial analysis of The Reject Shop
Business Financial analysis
Name of the Author
University Name-

Introduction
Each and every organization needs to make efforts to achieve its certain goals and
objective. It is analyzed that ratio analysis, du Pont analysis and capital budgeting are the some
of the financial tools which could be used to evaluate the past and future trend of business. In
this report, The Reject Shop Company has been selected to analysis and evaluates the financial
performance of company.
The Reject Shop Company
It is an Australian discount variety stores chain which was incorporated in 1981 and operates its
business on international level.
It is Australian Stock Exchange company and the market capitalization of the company is around
149 billion which has increased to 23% since last five years.
Financial analysis of company
The financial analysis reflects the relation between the two financial factors which assists
in evaluating the financial performance of company.
Liquidity ratio
This liquidity ratio analysis assists in evaluating the firm’s ability to redeem its short and long
term debts out of the current assets.
Current ratio
It shows how well company could redeem its short and long term debts out of the current assets. .
The current ratio of The Reject Shop Company already gone down 1.63 points in 2017 which is
10% low as compared to last year data (Robb, and Robinson, 2014).
Descriptio
n
Formula THE REJECT SHOP LTD (TRS) Cash Flow
Flag Ratio Analysis
2015` 2016 2017

Current
ratio
Current assets/current
liabilities 1.82 1.49 1.63
Quick
Ratio
Current assets-
Inventory/current
liabilities
0.35 0.31 0.26
Quick ratio
The quick ratio of The Reject Shop Company reveals its immediate ability to redeem its debts
out of its available quick assets. The Reject Shop Company has deceased its quick ratio to .26 in
2017 which is .09 points lower since last one year. It reflects that company has increased its
current liabilities (The Reject Shop, 2015).
Profitability ratio
This ratio reflects the Reject Shop Company’s ability to create value or earn profit in its
business.
Net profit margin
The net profit ratio of The Reject Shop Company reveals that company has increased its net
profit margin to 2.13% in 2016 which is 28% higher since last one year. The net profit margin
decreased to 1.51% IN 2017 which is 1 % low since last one year (Di Tella, 2017).
Descriptio
n
Formula THE REJECT SHOP LTD (TRS) Cash Flow
Flag Ratio Analysis
2015` 2016 2017
Net Profit
margin
Net profit/revenues 1.85% 2.13% 1.51%
Return on
equity
Net profit/Equity 10.37% 12.59% 8.89%
Return on
assets
Net profit/ Total assets 6.14% 7.36% 5.48%
Return on equity
The ROI of company reveals the profit distributed to its shareholders. It is observed that the
return on equity of company has decreased to 8.89% in 2017 which is 4% low since last one
year. It reflects that company has lower down its cost of capital. (The Reject Shop, 2016).

Return on assets-
The ROA of The Reject Shop Company has increased to 5.48% in 2017 that is 1% low since last
one year. It shows that company has increased its profitability as compared to its increased assets
investment (Marley, and Pedersen, 2015).
Solvency ratio
Descriptio
n
Formula THE REJECT SHOP LTD (TRS) Cash Flow
Flag Ratio Analysis
2015` 2016 2017
Debt to
Equity
Ratio
Debt/ Equity
0.70 0.70 0.62
Gearing
ratio
Interest/ EBIT
(0.01) (0.004) (0.004)
Debt to equity
The solvency ratio of The Reject Shop Company reveals that company has increased its financial
risk since last one year. It has reduced its debt to equity to .62 points in 2017 which is .08 points
lower as compared to last year data (Mudiyanselage, and Wijekoon, 2018).
The gearing ratio of company has also decreased and shows the negative results throughout the
time (Tayeh, Al-Jarrah, and Tarhini, 2015).
Efficiency ratio
The efficiency ratio reflects how well company has managed its investment in its business
(Robb, and Robinson, 2014).
Descriptio
n
Formula THE REJECT SHOP LTD (TRS) Cash Flow
Flag Ratio Analysis
2015` 2016 2017
Creditors
payable
period
creditors / Total
sales*365 31.29 22.27 23.26
Inventory
Turnover
ratio
COGS/ Sales*365
202.51 209.42 209.16
Asset
turnover
Total sales/ Total assets
3.32 3.46 3.63