- 10 Marks
CR – Nov 2016 – L3 – Q4b – Analysis and interpretation of financial statements
Write a report comparing Decimal Ltd’s financial performance with industry averages in terms of profitability, liquidity, efficiency, and shareholders’ investment.
Question
Below are the financial ratios for the year 2015 for Decimal Ltd, a company engaged in the buying and shipment of agricultural products. The ratios for the industry have also been provided.
| Ratios | Decimal Ltd | Industry Average |
|---|---|---|
| Quick ratio | 0.52:1 | 0.84:1 |
| Current ratio | 1.20:1 | 1.80:1 |
| Debtors collection period | 46 days | 41 days |
| Creditors payment period | 70 days | 50 days |
| Inventory holding period | 58 days | 48 days |
| Dividend yield | 3.6% | 9.0% |
| Debt to equity | 85% | 45% |
| Dividend cover | 1.4 times | 3.4 times |
| Gross profit margin | 18% | 28% |
| Net profit margin | 8% | 12.8% |
| Return on capital employed | 28% | 14% |
| Net assets turnover | 4.2 times | 1.9 times |
Required:
Write a report to the Shareholders of Decimal Ltd assessing its performance in comparison with the industry in respect of profitability, liquidity, efficiency, and shareholders’ investment.
(10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Efficiency, Financial Performance, Liquidity, Profitability, Ratio Analysis, Shareholder Investment
- Level: Level 3
- Topic: Analysis and Interpretation of Financial Statements
- Series: NOV 2016
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