IV. Conclusion: Based on your findings on ratio analysis and interpretation, what conclusion can you make? V. Recommendations: - What recommendations can you give to the company with regards to your findings? - What recommendations can you give to the investor with regards to your findings?
IV. Conclusion: Based on your findings on ratio analysis and interpretation, what conclusion can you make? V. Recommendations: - What recommendations can you give to the company with regards to your findings? - What recommendations can you give to the investor with regards to your findings?
Chapter5: Evaluating Operating And Financial Performance
Section: Chapter Questions
Problem 2EP
Related questions
Question
IV. Conclusion:
Based on your findings on ratio analysis and interpretation, what conclusion can you make?
V. Recommendations:
- What recommendations can you give to the company with regards to your findings?
- What recommendations can you give to the investor with regards to your findings?
![(2016) S)
3. Findings: Analysis and Interpretation
A Liquidity: Current Ratio, Quick Ratio
• Current Ratio = te
Curre ne
(2016)
- 1.08:1
(2015)=
Interpretation: In both years Shell's current assets ware lw,
compared to current liabilities, they needed to increase ther
current assets to meet short term requirement.
• Quick Ratio
Carrent dt-luter
Currend Lianies
(2016) - 0.87:1
S1.4
(2015)
= 0.95:1
Interpretation: In both years quick ratio ware less than standard
(1:1). It means the company is using its current assets
correctly
B.
Leverage : Debt to Total Assets Ratio, Debt to Equity Ratio
hart-term Det + lang-t be)
• Debt to Total Assets Ration
(2016)
Tetal A
a
- =0.55:1
(2015)-
- 0.53:1
Interpretation: In both years, it shows a low ratio, which
indicates less financial risk and a stronger equity position.
• Debt to Equity Rationngterm e shertterm Bee
Faal Sharehaldere Eqity
(2016)
= 1.17:1
(2015)
.72
-1.13:1
Interpretation: In both years, it shows a high ratio, which
indicates more debt than owners' fund.
• Gross Profit Ratio tratia 100
(2016) Ax
100 - 136.08
(2015) x 100 - 119.17
Interpretation: The company's ability to generate income as a
company to expenses and other costs associated with the
generation of income in a particular period.
• Net Profit Ratio-rafitafterTer x 100
Sales
(2016) x 100 = S52.92
(2015) x 100 = 119.17
175.00
• Operating Profit Ratio n atx 100
Sale
(2016)
x 100 - 63.66
(2015)-
16.231e
x 100 = 50.88
Sres Profe
Gross Profit Margin
Tetal Revene
(2016) x 100 - 10.02
(2015) x 100 - 1131
• Net Profit Margin
n Profit
Tet x 100
(2016)
ZAx 100 - 4.07
32,
(2015) x 100 - 4.21](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03afeeb4-8887-46ca-b619-89f5469fb6d9%2Fbaa0e90d-deab-467e-8191-fcf81fa06cec%2F1k4mp7d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:(2016) S)
3. Findings: Analysis and Interpretation
A Liquidity: Current Ratio, Quick Ratio
• Current Ratio = te
Curre ne
(2016)
- 1.08:1
(2015)=
Interpretation: In both years Shell's current assets ware lw,
compared to current liabilities, they needed to increase ther
current assets to meet short term requirement.
• Quick Ratio
Carrent dt-luter
Currend Lianies
(2016) - 0.87:1
S1.4
(2015)
= 0.95:1
Interpretation: In both years quick ratio ware less than standard
(1:1). It means the company is using its current assets
correctly
B.
Leverage : Debt to Total Assets Ratio, Debt to Equity Ratio
hart-term Det + lang-t be)
• Debt to Total Assets Ration
(2016)
Tetal A
a
- =0.55:1
(2015)-
- 0.53:1
Interpretation: In both years, it shows a low ratio, which
indicates less financial risk and a stronger equity position.
• Debt to Equity Rationngterm e shertterm Bee
Faal Sharehaldere Eqity
(2016)
= 1.17:1
(2015)
.72
-1.13:1
Interpretation: In both years, it shows a high ratio, which
indicates more debt than owners' fund.
• Gross Profit Ratio tratia 100
(2016) Ax
100 - 136.08
(2015) x 100 - 119.17
Interpretation: The company's ability to generate income as a
company to expenses and other costs associated with the
generation of income in a particular period.
• Net Profit Ratio-rafitafterTer x 100
Sales
(2016) x 100 = S52.92
(2015) x 100 = 119.17
175.00
• Operating Profit Ratio n atx 100
Sale
(2016)
x 100 - 63.66
(2015)-
16.231e
x 100 = 50.88
Sres Profe
Gross Profit Margin
Tetal Revene
(2016) x 100 - 10.02
(2015) x 100 - 1131
• Net Profit Margin
n Profit
Tet x 100
(2016)
ZAx 100 - 4.07
32,
(2015) x 100 - 4.21
![ROCE .
PBIT
• Return Of Capital Employed (ROCE)=
х 100
Capital Employed
• Capital Employed=Company's Equity+ Non-Current Liabilities
(2016)-44292000+601000=44893000
x 100=41.03
(2015) =38870,000+6729,000=45599,000
ROCE=16233,000 x 100=35.59
45599000
• Return On Equity=ereholder Equity
Net Income
1602,000
10000000
(2015):
14,175,000
10000000
=1,41
Interpretation: The higher the ratio, the better, because the
shareholders get more profit.
Interpretation: Capital employed; the higher the ratio, the more
efficient the management and utilization of capital employed.
C.
Profitability: Based on Sales, based on Investment and based
on Market Ratios
• Earnings Per Share (EPS)=
160022000 -0.160
Net Profit
No. of Shares
(2016)=10000000
14,175,000
(2015)=
=0.142
100000000
Interpretation: Indicates that company making less profit from
operations, and it will give the investor less an indicate of future
growth in profit and price of share.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03afeeb4-8887-46ca-b619-89f5469fb6d9%2Fbaa0e90d-deab-467e-8191-fcf81fa06cec%2F4cpieoi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:ROCE .
PBIT
• Return Of Capital Employed (ROCE)=
х 100
Capital Employed
• Capital Employed=Company's Equity+ Non-Current Liabilities
(2016)-44292000+601000=44893000
x 100=41.03
(2015) =38870,000+6729,000=45599,000
ROCE=16233,000 x 100=35.59
45599000
• Return On Equity=ereholder Equity
Net Income
1602,000
10000000
(2015):
14,175,000
10000000
=1,41
Interpretation: The higher the ratio, the better, because the
shareholders get more profit.
Interpretation: Capital employed; the higher the ratio, the more
efficient the management and utilization of capital employed.
C.
Profitability: Based on Sales, based on Investment and based
on Market Ratios
• Earnings Per Share (EPS)=
160022000 -0.160
Net Profit
No. of Shares
(2016)=10000000
14,175,000
(2015)=
=0.142
100000000
Interpretation: Indicates that company making less profit from
operations, and it will give the investor less an indicate of future
growth in profit and price of share.
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