Ratios
University of Malta
Faculty of Economics, Management and Accountancy
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BKF 2321: Accounting for Bankers 1 and 2
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Assignment 2012/2013 – Semester 2
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B. Com (Major in Banking and Finance) – Year III
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Ratio Analysis Report
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Student: Kevin Galea 205891 (M)
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Lecturer: Dr. Emanuel Camilleri
Introduction
The purpose of the following report is to aid Build-It Ltd in planning the direction that the company may want to go over the next few years. The report entails a financial analysis which will give the directors an understanding of how well the company is performing.
Figures were obtained from comparative balance sheets and profit and loss statements from the last two years. This information enabled the development of percentage and ratio analysis (see appendices), which was then used to create the report.
Profitability Ratios Analysis
Profitability refers to the ability to make profit from the company’s business activities. It shows how efficiently the management can make profit by using all the resources available.
A very important ratio is the Return on Capital Employed (ROCE). This shows the profit made in relation to the resources employed. Build-It Ltd’s ROCE ratios for 2011 and 2012 were calculated as 22.12% and 25.64% respectively. This increase in the ROCE represents that Build-It Ltd has strengthened marginally its profitability position of the firm.
Although the company had an increase of €50,000 in long-term liabilities, this increase has been more than off-set by the net profit, which has more than tripled from €7,371 to €25,095.
The Return on Equity (ROE) shows how much profit the company earned in comparison to the total amount of
Faculty of Economics, Management and Accountancy
-------------------------------------------------
BKF 2321: Accounting for Bankers 1 and 2
-------------------------------------------------
Assignment 2012/2013 – Semester 2
-------------------------------------------------
B. Com (Major in Banking and Finance) – Year III
-------------------------------------------------
Ratio Analysis Report
-------------------------------------------------
Student: Kevin Galea 205891 (M)
-------------------------------------------------
Lecturer: Dr. Emanuel Camilleri
Introduction
The purpose of the following report is to aid Build-It Ltd in planning the direction that the company may want to go over the next few years. The report entails a financial analysis which will give the directors an understanding of how well the company is performing.
Figures were obtained from comparative balance sheets and profit and loss statements from the last two years. This information enabled the development of percentage and ratio analysis (see appendices), which was then used to create the report.
Profitability Ratios Analysis
Profitability refers to the ability to make profit from the company’s business activities. It shows how efficiently the management can make profit by using all the resources available.
A very important ratio is the Return on Capital Employed (ROCE). This shows the profit made in relation to the resources employed. Build-It Ltd’s ROCE ratios for 2011 and 2012 were calculated as 22.12% and 25.64% respectively. This increase in the ROCE represents that Build-It Ltd has strengthened marginally its profitability position of the firm.
Although the company had an increase of €50,000 in long-term liabilities, this increase has been more than off-set by the net profit, which has more than tripled from €7,371 to €25,095.
The Return on Equity (ROE) shows how much profit the company earned in comparison to the total amount of