Financial Ratio Analysis
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
REPORT ON RATIO ANALYSIS
OF
M/S RANI LIMITED
PREPARED FOR:
Board of Directors
PREPARED BY:
Management Accountant
TABLE OF CONTENTS
Particulars
Executive Summary
Introduction
Page No.
3-4
5
Financial Position and Ratio Analysis
6 - 10
Suggestions & Conclusion
11 - 12
Appendices
Horizontal & Vertical Analysis of Income Statement
Comparative Ratios & averages
Trend of Ratios & Percentages
Graphical Representation
13
14
15
16
Page 2 of 16
EXECUTIVE SUMMARY
This report provides an analysis and evaluation of the current and prospective profitability, liquidity and financial stability of Rani Ltd. Methods of Analysis include trend horizontal and vertical analyses as well as ratios such as Current and
Quick Ratios. Other calculations include return on Shareholders Equity and Total
Assets and earnings per share to name a few. All calculation can be found in the appendices. Results of data analyzed show that the company’s total revenue has increased but Net profit Margin have declined due to increase in cost of sales.
Over all liquidity position of Rani Ltd. is satisfactory although quick ratio is at alarming level. Corrective measures are required to avoid any liquidity problems in future.
The Operating cycle is rising due to huge level of inventories, and receivables collection period. Fall in liquidity ratios, rapid increase in revenues, increase in inventory in relation to revenue, uneven increase in receivables and increase in accounts payable period and decrease in profit margin are the symptoms of
“Overtrading”.
In line with the decrease in net profit, earning per share has also drastically reduced to Rs.3.22 (2010) from Rs.2.665 (2012) over preceding years.
Page 3 of 16
This report finds the prospects of the company in its current position are not positive. The major areas of weakness require further
REPORT ON RATIO ANALYSIS
OF
M/S RANI LIMITED
PREPARED FOR:
Board of Directors
PREPARED BY:
Management Accountant
TABLE OF CONTENTS
Particulars
Executive Summary
Introduction
Page No.
3-4
5
Financial Position and Ratio Analysis
6 - 10
Suggestions & Conclusion
11 - 12
Appendices
Horizontal & Vertical Analysis of Income Statement
Comparative Ratios & averages
Trend of Ratios & Percentages
Graphical Representation
13
14
15
16
Page 2 of 16
EXECUTIVE SUMMARY
This report provides an analysis and evaluation of the current and prospective profitability, liquidity and financial stability of Rani Ltd. Methods of Analysis include trend horizontal and vertical analyses as well as ratios such as Current and
Quick Ratios. Other calculations include return on Shareholders Equity and Total
Assets and earnings per share to name a few. All calculation can be found in the appendices. Results of data analyzed show that the company’s total revenue has increased but Net profit Margin have declined due to increase in cost of sales.
Over all liquidity position of Rani Ltd. is satisfactory although quick ratio is at alarming level. Corrective measures are required to avoid any liquidity problems in future.
The Operating cycle is rising due to huge level of inventories, and receivables collection period. Fall in liquidity ratios, rapid increase in revenues, increase in inventory in relation to revenue, uneven increase in receivables and increase in accounts payable period and decrease in profit margin are the symptoms of
“Overtrading”.
In line with the decrease in net profit, earning per share has also drastically reduced to Rs.3.22 (2010) from Rs.2.665 (2012) over preceding years.
Page 3 of 16
This report finds the prospects of the company in its current position are not positive. The major areas of weakness require further