Learning outcome 1 United Motors Lanka founded a market opportunity in the year 2010 and went to cash on it.

In this section we will analyze the financial statements of the company in order to find out the impact of the opportunity on the financials of the company. For this purpose ratio analysis will !e done. Li"uidity #atios $he li"uidity aspect will !e %udged using the current and the li"uid ratios. &urrent ratio is calculated !y di'iding the current assets !y the current lia!ilities. In order to make comparison we ha'e used financial statements for the year 2011(12 and 2010(11. For 2011(12 &urrent assets ) *+,+-1. &urrent Lia!ilities) 2+21++/ &urrent #atio ) &urrent assets0 &urrent Lia!ilities ) *+,+-1.02+21++/ ) 1.-+ For 2010(11 &urrent assets ) 1.1..1. &urrent Lia!ilities) **2-/2 &urrent #atio ) &urrent assets0 &urrent Lia!ilities ) 1.1..1.0**2-/2 ) *.*2 Li"uid ratio For 2011(12 Li"uid assets ) 1.1.1.0 Li"uid Lia!ilities) 2+21++/ Li"uid #atio ) Li"uid assets0 Li"uid Lia!ilities ) 1.1.1.002+21++/ ) 0.-,

For 2010(11 Li"uid assets ) .--//2 Li"uid Lia!ilities) **2-/2 Li"uid #atio ) Li"uid assets0 Li"uid Lia!ilities ) .--//20**2-/2 ) 2.20 2oing !y the li"uidity ratios it is clear that the li"uidity of the company has !een ad'ersely affected after going for the new market opportunity. 3fficiency ratios 4ssets turno'er ratio5 $his ratio will !e calculated !y di'iding the sales !y fi6ed assets. For 2011(12 7ales ) /12.*11 Fi6ed assets ) 1/+11+2 4ssets turno'er ratio ) /12.*1101/+11+2 ) *.1For 2010(11 7ales ) *.0-,+/ Fi6ed assets ) 1/,+*,4ssets turno'er ratio ) *.0-,+/01/,+*,- ) 2.+4s the turno'er has increased it shows high utilization of assets. 7tock turno'er ratio5 It is calculated !y di'iding the cost of sales !y the a'erage stock For 2011(12 &ost of sales ) +0/,+*1 4'erage stock ) 2-1-12.

7tock turno'er ratio ) +0/,+*102-1-12. ) 2.2* For 2010(11 &ost of sales ) ,++1,2. 4'erage stock ) ./20,7tock turno'er ratio ) ,++1,2.0./20,- ) ,.-, $he stock turno'er seems to !e "uite low which shows that the firm is not 'ery efficient in selling stocks. 8e!tors turno'er ratio5 this is calculated !y di'iding the de!tors !y the credit sales multiplied !y ,+1 days. For 2011(12 8e!tors) 11+*+ &redit sales ) +0/,+*1 8e!tors turno'er ratio ) de!tors 9 ,+10credit sales ) 11+*+9,+10+0/,+*1) 0.., For 2010(11 8e!tors) 1+,+2. &redit sales ) ,++1+2. 8e!tors turno'er ratio ) de!tors 9 ,+10credit sales ) 1+,+2.9,+10,++1+2.) 1+.12 $he de!tor:s turno'er ratio has impro'ed "uite a lot which shows that the firm has !een a!le to recei'e money from its de!tors on time. ;owe'er going !y the actual figures of de!tors there has !een significant reduction from the year 2010(11 and 2011(12. <rofita!ility ratios5 these ratios measure the profit earning capacity of the organization. 2ross <rofit Margin5 It is calculated !y di'iding the gross profit !y the net sales.

For the year 2011(12 2ross <rofit) 2**1/0+ =et sales) /12.*11 2ross <rofit Margin ) 2**1/0+0/12.*11) 2/.+-> For the year 2010(11 2ross <rofit) 12*20,. =et sales) *.0-,+/ 2ross <rofit Margin ) 12*20,.0*.0-,+/) 21.,0> $he gross profit of the organization has impro'ed marginally which is a good sign. #eturn on e"uity( it is calculated !y di'iding the net income !y the shareholders e"uity. For the year 2011(12 =et income) 1,*1-,* 3"uity ) *+*1*0, #eturn on e"uity) 1,*1-,*91000*+*1*0,) 2/..0> For the year 2010(11 =et income) 11//1* 3"uity ) ,-200// #eturn on e"uity) 11//1*91000,-200//) 1,..*> $he return on e"uity has impro'ed considera!ly after taking the opportunity.

In'estment ratio 3arnings per share5 It is calculated !y di'iding the profit !y the num!er of e"uity shares. For the year 2011(12 =et profit) 1,*1-,* =o. of 3"uity ) +-2+#eturn on e"uity) 1,*1-,*0+-2+-) 1...1 For the year 2010(11 =et income) 11//1* 3"uity ) +-2+#eturn on e"uity) 11//1*0+-2+-) -.-1 ?ith the taking up of this opportunity the earnings per share has also increased. 2oing !y the a!o'e analysis it seems that the li"uidity is "uite low@ thus the company needs to ha'e more li"uid assets in order to com!at with the difficult times. Further the company has !een a!le to impro'e its gross profit ratio return on e"uity de!tor:s turno'er ratio. ;owe'er the company is una!le to realize its fi6ed assets to the ma6imum e6tent.