Financial Management & Ratio Analysis of ATC Company - Report

This report provides a comprehensive financial analysis of ATC Company, evaluating its financial performance and key ratios for the years 2015 and 2016. The analysis covers aspects such as profitability, efficiency, and capital structure, utilizing various financial ratios including current ratio, acid test ratio, gross profit ratio, net profit ratio, return on capital employed, and capital gearing ratio. The findings indicate increased profitability and efficient capital utilization, but also highlight the need for ATC Company to reduce its financial leverage. Recommendations include focusing on increased value creation and reducing debt capital. The report references relevant literature to support its analysis and recommendations, providing a well-rounded assessment of ATC Company's financial standing. Desklib offers students access to similar solved assignments and past papers for further study and reference.

Financial Management of
ATC Company

FINANCIAL ACCOUNTING INFORMATION
Current assets
Inventories / Stock
Current liabilities
Prepaid expenses
Average Inventory
Sales revenue
Cost of sold
Credit purchases
Gross profit
Net sales
Net profit
Capital employed
Interest
Total assets
Variable cost bearing capital
Fixed cost bearing capital
Administrative expenses
Quick assets
Operating Profit
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Management accounting information
2016 2015

EFFICIENCY RATIO OF ATC COMPANY
 It has increased its overall profit.
 Increased efficiency by 20% since last one year.
 Focused on reduced cost of capital (Becker, 2016).
9,85,376
8,61,336
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Capital Employed
Current liabilities Capital Employed

RESULTS AND FINDING FROM THE FINANCIAL
INFORMATION
• Increased profitability
• Effective use of capital in organization.
• Strong capital gearing ratio and strengthen capital structure.
• Increased business outcomes (Bernhardt, 2017).
•

RATIO ANALYSIS
RATIO
Formula
2016
2015
Current ratio Current assets / Current liabilities 1.435 2.886
Acid Test Ratio Current assets – (stock + prepaid expenses) / Current liabilities 1.332 2.803
Stock turnover ratio Cost of goods sold / Average Inventory (69.40) (89.50)
Gross profit ratio Gross profit / net sales X 100 62.19% 61.49%
Net profit ratio Net profit / net sales X 100 12.02% 9.58%
Return on capital employed Net profit / capital employed X100 3.81% 2.69%
Return on total assets Net profit after tax / total assets X 100 3.54% 2.51%
Capital gearing ratio Variable cost bearing capital / fixed cost bearing capital 2.424 2.185
Administrative expenses ratio Interest expenses / Operating profit X 100 -20.67% -28.04%

RECOMMENDATION
• ATC company needs to reduce its overall financial
leverage.
• It needs to focus on increased value creation of the
business.
• Company has created value by setting new standards
for the growing financial outcomes.
• Needs to reduce its debt capital to reduce the financial
leverage (Cook, et al. 2014).

REFERENCES
• Becker, E. (2016). Overbooked: The exploding business of travel and
tourism. Simon and Schuster.
• Bernhardt, S. M. (2017). Strategy Analysis and Business Plan for
Red Barn Farm (Doctoral dissertation, The College of St.
Scholastica).
• Cook, R. A., Hsu, C. H., & Marqua, J. J. (2014). Tourism: the business
of hospitality and travel. Boston, MA: Pearson.