Ratios

Industry Average (2011)

2011

2010

PROFITABILITY AND RETURN ON CAPITAL 35.4% ROCE 30% Profit margin Asset turnover Gross profit margin Net profit margin BORROWINGS Liabilities ratio Capital gearing ratio Debt/Equity ratio Interest cover 15.80% 1.6 times 26% 13.30% 50% 13% 15% 25.7 times 11.64% 3.13 times 45% 10% 52% 10% 12% 20 times

32.8% 12.94% 2.54 times 40% 9% 61% 13% 16% 11 times

LIQUIDITY AND WORKING CAPITAL Current ratio Quick ratio (Acid ratio) Debtor days ratio Stock turnover period Credit turnover 120% 90% 25 days 13.8 days 90 days

SHAREHOLDERS' INVESTMENT RATIOS Earning per share 0.45 per (EPS) share 0.09 per Dividend per share share Dividend cover 5 times P/E ratio 3 times Dividend yield 4%

Is the companys financial ratio better or worse? 2) How much better or worse? 3) Causes of better performance or poorer performance?
1)

ANALYSIS OF PROFITABILITY AND RETURN ON CAPITAL RATIOS The companys improvement in ROCE between 2011 and 2010 is attributable to a higher asset turnover from 2.54 times to 3.13 times. In deed, the profit margin has fallen a little (1.3%) but the higher asset turnover has more than compensated for this. Compared to the industry, the companys ROCE and asset turnover are better in both years. However, its profit margin is 4.16% lower than the industry in 2011. The higher gross profit margin from 40% in 2010 to 45% in 2011 has led to an improvement by 1% in the net profit margin. This is because the percentage of cost of sales decreased from 60% from 55% in 2010. Compared to the industry, the companys gross margin is higher in the 2-year period but its net profit margin is lower, possibly because the company does not manage operating expenses efficiently. As a result, the proportion of expenses over sales is greater. ANALYSIS OF BORROWINGS RATIOS As we can see in this table, the first three ratios in 2011 are improved. At first, Liabilities ratio declines from 61% to 52% because the total assets increase while the total debt decrease. Next, the capital gearing ratio in 2011 is 3% better , that is cause by the increasing of total capital and the declining of prior charge capital. The debt/equity ratio is also better (4%) because the prior charge capital is stainable but the ordinary share capital and reserves still go up. The last ratio in interest cover is also better because PBIT increases while interest charges go down.