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Transcript of Financial Solution net
[email protected], 2014_08 ([email protected])
MEMO
To Managing Director (Fan Milk Limited ),
From Individual Financial Analyst
Date 20/08/2014
Subject Five Year Financial Performanceof Fan Milk Limited
The following are the summarized financial statements of fan
milk Limited for the past five years.
STATEMENT OF COMPREHENSIVE INCOME
All amounts are expressed in thousands of Ghana cedis
2012 2011 2010 2009 2008
GH¢ GH¢ GH¢ GH¢ GH¢
[Type text] Page 1
Revenue
147,2
12.00
109
,280.00
103,7
75.00
82,
471.00
55,
041.00
Cost of Sales
(69,
799.00)
(51
,908.00
)
(48,2
93.00)
(38,4
60.00)
(28,5
99.00)
Gross Profit
77,
413.00
5
7,372.0
0
55,4
82.00
44,
011.00
26,
442.00
Distribution
Cost
(33,
780.00)
(25
,560.00
)
(22,3
42.00)
(18,6
28.00)
(12,5
69.00)
Administrativ
e Cost
(11,
375.00)
(
8,429.0
0)
(8,
432.00)
(6,
184.00)
(4,
873.00)
Other Income
446.00
350.00
141.00
759.00
500.00
Operating
Profit
32,
704.00
23,733.
00
24,8
49.00
19,
958.00
9,
500.00
2
Interest
Received - -
1,
120.00
41
8.00 -
Finance
Income
4
,067.00
1,680.0
0 - - -
Finance Cost
(329.00
)
(162.00
)
(156.00
)
(
201.00)
(
113.00)
Profit Before
Tax
36,
442.00
2
5,251.0
0
25,8
13.00
20,
175.00
9,
387.00
IncomeTax
Expenses
(9,
244.00)
(
6,432.0
0)
(6,
443.00)
(5,
019.00)
(2,
333.00)
Profit After
Tax
27,
198.00
1
8,819.0
0
19,3
70.00
15,
156.00
7,
054.00
3
Other
comprehensive
, income
1.00
1.00
-
-
-
27,19
9.00
18,
820.00
19,370
.00
15,15
6.00
7,0
54.00
STATEMENT OF FINANCIAL POSITION
All amounts are expressed in thousands of Ghana cedis
2012 2011 2010 2009 2008
ASSETS GH¢ GH¢ GH¢ GH¢ GH¢
Non Current
Assets
P P E
51
,904.0
0
4
3,771.0
0
29,
530.00
23
,269.0
0
15
,084.0
0
Current Assets
Inventory 15
,640.0
1
2,679.0
9
,739.0
9
,656.0
6
,811.0
4
0 0 0 0 0
Trade
Receivables
4,080.
00
2,215.0
0
2
,971.0
0
2
,318.0
0
2
,129.0
0
Cash and Cash
Equivalent
24
,929.0
0
2
4,416.0
0
26,
151.00
15
,871.0
0
8
,834.0
0
Total Assets
96,5
53.00
83,
081.00
68,39
1.00
51,1
14.00
32,8
58.00
EQUITY AND LIABILITIES
Equity
Stated Capital
10
,000.0
0
1
0,000.0
0
10,
000.00
6
,000.0
0
6
,000.0
0
Income Surplus
51
,681.0
0
5
2,372.0
0
42,
126.00
29
,082.0
0
15
,410.0
0
61
,681.0
6
2,372.0
52, 35
,082.0
21
,410.0
5
0 0 126.00 0 0
Liabilities
Non Current
Liabilities:
De
ferred Tax
3,664.
00
2,824.0
0
1
,735.0
0
1
,330.0
0
808.00
Current
Liabilities:
Tra
de Payables
21
,595.0
0
1
7,382.0
0
14,
031.00
14
,272.0
0
9
,719.0
0
Inc
ome Tax
311.00
103.00
162.00
137.00
699.00
Div
idend Payables
9,302.
00
400.00
337.00
293.00
222.00
6
34
,872.0
0
2
0,709.0
0
16,
265.00
16
,032.0
0
11
,448.0
0
Total EquityAnd
Liabilities
96,5
53.00
83,
081.00
68,39
1.00
51,1
14.00
32,8
58.00
Required:
Assume that you are an external consultant to fan milk
Limited. Prepare a report for the board of directors
commenting on the performance of the business over the five
years using ratios and any other information that you consider
appropriate.
Your report should address the following issues:
Reasons for using ratio analysis
Description and justification of the ratios you decided
to use.
Calculation of the ratios.
Findings of your analysis with recommendations for
future consideration by fan milk Limited.
7
Limitations of your analysis with regards to the
information you have been provided; what kind of
information could help you to develop a more robust
ratio analysis?
Limitations of ratio analysis in general.
Contents1.0 Introduction...................................................31.1 Concepts of Ratio Analysis.....................................4
2.1 Liquidity or Short term solvency ratios........................42.1.1 Current Ratio................................................5
8
2.2.1 Quick Ratio..................................................62.3.1 Debt Collection Period.......................................7
3.0 Activity or efficiency ratios..................................73.2 Sales to Capital Employed....................................8
3.3 Receivables Turnover Period....................................84.0 Long term financial stability ratios...........................8
4.1 Fixed Interest Cover...........................................94.2 Fixed Dividend Cover...........................................9
4.3 Debt Ratio....................................................105.0 Profitability ratios..........................................10
5.1 Gross Profit Margin...........................................115.2 Net Profit Margin.............................................11
5.3 Return on capital employed (ROCE).............................116.1 limitations of the company (Fan Milk Limited).................12
6.2 Limitations associated to Ratio Analysis......................127.1 Conclusion....................................................13
7.2 Recommendation................................................14Reference.........................................................16
Appendix..........................................................17Appendix A: Short Term Liquidity for the five year period.........17
Appendix B: Activity or Efficiency Ratios.........................18Appendix C: Gearing or Long term Financial Stability Ratio.......18
Appendix D: PROFITABILITY RATIOS..................................19
1.0 Introduction
9
This financial report is to analyze five fiscal years of the
Fan Milk Limited for the Board of Directors. The main
objective of this report is to represent independent and fair
performance of the company’s business.
This also go a long way in representing and assuming with
references all other information that may lead to the true
representation of figure obtained by the company’s operation
in the five financial years. This analysis is mainly based an
empirical mathematical means called the Ratios Analysis.
“Ratio Analysis is a form of Financial Statement Analysis
that is used to obtain a quick indication of a firm's
financial performance in several key areas. The ratios
are categorized as Short-term Solvency Ratios, Debt
Management Ratios, Asset Management Ratios,
Profitability Ratios, and Market Value Ratios”.
(zenwealth.com, August 2014)
This tool has many essential fields. Data in financial
statements of companies are to make available for scrutiny.
Manipulation of data via ratios enables evaluation of
companies of various sizes. This helps in comparing the
10
financial performance within a particular industry averages.
In further pursuit ratios can be used in tend analytical ways
to show areas of performance or failures in respect of a given
period.
Since the ratios are focused on available Accounting
Information, efficiency is restricted by the biases obtained
from financial statements as a result of Historical Cost
Accounting and Inflation. Hence, Ratio Analysis ought only to
be applied as the initial phase any financial analysis, to
acquire a fast sign of company’s performance and to detect
areas which need much further scrutiny.
This report will present the most widely use ratio analysis in
each areas given above to access the realistic performance of
Fan Milk limited. The Directors should note that there is no
well accepted agreement on the number or ratios to use in all
analysis. Therefore comparing the ratios to the industrial
average has to use the same formulation as shown below.
1.1 Concepts of Ratio AnalysisAnalysis and interpretation of the ratios including the
justification of the ratios used
11
In the analysis of fan milk Limited to indicate the
performance of the company’s business over a period of five
years, the accounting ratios of the fiscal year are computed
under four main categories:
a. Liquidity or Short term solvency ratios
b. Activity or efficiency ratios
c. Long term solvency and financial stability ratios
d. Profitability ratios
2.1 Liquidity or Short term solvency ratiosShort term Solvency Ratios try to quantify the ability of the
fan milk Limited to see its short term financial
responsibilities. These ratios pursue to control the capacity
of the firm to prevent financial constraints in the short
period. The two greatest vital Short-term Solvency Ratios are
the Quick Ratio or Acid-Test Ratio and the Current Ratio. Debt
Collection Period, Inventory Turnover and Inventory Turnover
Period were also considered.
Table 1.1: Liquidity or Short term solvency ratios analysis
12
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Current Ratio (%) 1.43 2.20 2.67 1.89 1.67Quick Ratio (%) 0.93 1.49 2.00 1.24 1.03Debt Collection Period (365 days)
281.58 1847.08 324.89 350.12 -
Inventory Turnover Period(365 days) 74.04 78.82 73.29 78.14 -Inventory Turnover 0.20 0.22 0.20 0.21 -
2.1.1 Current Ratio
It is a liquidity ratio and also termed as capital ratio,
shows the proportion of current assets of the business in
relation to its current liabilities. According to Atrill and
McLaney (2006) the ideal current ratio is usually 2:1 for all
businesses. This means that the current assets are enough to
cover two times the amount of the company’s liabilities. In
real terms a company will like to manage current ratio of not
less than 1 to provide cushioning from any unforeseeable
contingencies which may arise in the short term.
In this event it has to be test over a period before one give
the base line. Considering information in table 1.1, it show
that during the five year period the current ratio of Fan Milk
limited has being appreciative with all having significant
figures above 1. The company did appreciatively well from 2009
13
to 2011, this may be as a result of the use of resources tied
up in working capital that may have been put into more
profitable use elsewhere. In other terms in 2008 might have
been the risky strategy that could have caused liquidity
problems for Fan milk Limited. In 2012 dropped to 1.43 far
below the preceding once, this may be on the account of
expansion that saw it long term liabilities swell up while the
company try to maintain its assets.
2.2.1 Quick Ratio
This ratio is also known as the Acid Test Ratio, it gives the
relation between current assets without inventories and to
that of the company’s liabilities comparatively. The
mathematical formula is can be found in the appendix.
According to accounting-simplified.com (August, 2014):
Quick ratio shows the extent of cash and other current
assets that are readily convertible into cash in
comparison to the short term obligations of an
organization. A quick ratio of 0.5 would suggest that a
14
company is able to settle half of its current liabilities
instantaneously
This shows solvency of the company and always assessed our
time period. A quick ratio of 0.5 may suggest that the company
will be able to settle half of its current liabilities
suddenly. If the ratio is larger than company’s average this
may as a result of investing too many resources in the capital
employed in the firm which may more profitably be used
elsewhere. From the table 1.1, it can be assumed that the
company has too much unused cash across the five year as the
ratio increase steadily from 2008 to 2010.
The quick ratio was higher in 2010 then reduces from 2.0 to
0.93, this suggests that the company was going for too much
risk and not maintaining the exact buffer of liquid resource.
Another is, the company is obtaining a better credit
accessibility with suppliers other than competitors.
2.3.1 Debt Collection Period
15
Debt is the owed business money by companies or entities.
Therefore debt collection period is the average receivables
taken in days; the company receives money from people who owed
them. The earlier the debtor pays the better is it for the
company, therefore debtor’s collection period of shorter days
is good. Quick payment helps cashflow and minimizes the risk
of customers not paying owed money. The formula is found in
the appendix.
The Fan Milk limited in 2008 had no debt to collect since
there were no opening receivables; in 2009 it obtained its
highest debt collection period this was as a result allowing
more creditors to owe for a longer period since it was now
establish market completion. This then appreciated for two
years which is as a result of debtor’s paybacks. This then
became much higher in 2012, 281.58days, this was attributed to
more purchase of inventory on credit.
2.0 Activity or efficiency ratios3.0
Efficiency ratios examine the ways in which various resources
of the business are managed (Atrill and Mclaney, 2006). The
16
ratios consider in the table are some of the more important
aspects of resource management:
Table 1.2: Activity or efficiency ratios of Fan Milk Limited
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Sales to Assets Ratio 1.52 1.32 1.52 1.61 1.68Sales to Capital Employed 2.25 1.68 1.93 2.26 2.48Receivables TurnoverPeriod 16.46 18.23 19.99 21.10 -3.1 Sales to Asset Ratio
It is the sales made by the company compared with its assets.
The higher the ratio the better it is for the firm in
performance, if it low then the investment or the capital
employ is depreciative to market sale hence low profit margin.
In table1.2, the ratio has being performing fairly well since
the assumed minimum is 1. Hence product sales has being good
throughout the five years.
3.2 Sales to Capital Employed
The sales revenue to capital employed ratio (or asset turnover
ratio) examines how effectively the assets of the business are
being used to generate sales revenue. Generally speaking, a
higher asset turnover ratio is preferred to a lower one. A
17
higher ratio will normally suggest that assets are being used
more productively in the generation of revenue. From 2008 to
2011, the ratio was deteriorating. This was a result of
borrowing in terms of long term loans for product expansion
while maintaining sales, but after this it then appreciated in
2012 with a rise.
3.3 Receivables Turnover PeriodA business will usually be concerned with how long it takes
for customers to pay the amounts owing. The speed of payment
can have a significant effect on the business’s cash flow. If
it takes long time the poorer the cashflow and if it’s shorter
the better. In table 1.2 is by comparing average receivable to
the cost of sales of the firm. This that from 2009 to 2012 the
period was appreciating, this shows that customers are able to
pay quicker.
4.0 Long term financial stability ratios This occurs when a business is financed, at least in part, by
borrowing, instead of by finance provided by the owners (the
shareholders). The table 3.1 look at some of them for the five
year period.
18
Table1. 3: Long term financial stability ratios
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Fixed Interest Cover110.77 155.87 158.29 98.29 83.07
Fixed Dividend Cover 3.92 63.13 73.27 67.43 42.28Proprietary ratio 1.38 1.59 1.34 1.26 1.20Debt Ratio 36.12 24.93 23.78 31.37 34.84Long term debt to Shareholders fund
4.1 Fixed Interest Cover
The interest cover ratio measures the amount of profit
available to cover interest payable. This ratio shows that the
level of profit is considerably higher than the level of
interest payable (Atrill and Mclaney, 2006). The lower the
level of profit coverage, the greater the risk to lenders that
interest payments will not be met, and the greater the risk to
the shareholders that the lenders will take action against the
business to recover the interest due.
The equation can be seen in appendix. Considering table 1.3,
the interest cover ratio has increased dramatically from a
position where profit covered interest 83.05 times in 2008, to
one where profit covered interest only 110.77 times in 2012.
19
This was partly caused by the increase in borrowings in from
2008 successively to 2012, but mainly caused by the dramatic
increase in profitability.
4.2 Fixed Dividend Cover
This the ratio of comparing net profit after interest and tax
to preference dividend paid. The higher the profit after
deductible tax the better and if the preference dividend paid
is higher the poorer the cover. If the ratio is higher the
better for the company as profit increase. In table 1.3 above,
it appreciated form 2008 at 42.28 to 2010 at 73.27, thus
profit is high but then decline to a very low in 2012 at 3.92.
This be the cause of increase in customer’s credit hence less
casflows.
4.3 Debt Ratio
It is the comparison of total debt to the total assets of the
company performance. The lower the ratio the better as the
company is less likely to liquidate. Looking at the table 1.3,
from 2008 at 23.78% to 2010 at 34.84%. The debt ratio then
became worst by increase to 36.12% in 2012 which shows that,
20
the company might have gone through major borrowing for
expansion.
5.0 Profitability ratios
The following ratios may be used to evaluate the profitability
of the business:
Expense/sales
Return on capital employed;
Net profit margin; and
Gross profit margin.
Table 1.4: Profitability ratios
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Gross Profit Margin 52.59 52.50 53.46 53.37 48.04
Net Profit Margin 18.48 17.22 18.67 18.38 12.82Expense/Sales 30.67 31.10 29.65 30.09 31.69
ROCE 0.56 0.39 0.46 0.54 0.42
5.1 Gross Profit Margin
21
The gross profit margin ratio relates the gross profit of the
business to the sales revenue generated for the same period.
Gross profit represents the difference between sales revenue
and the cost of sales (Atrill and Mclaney, 2006). This is an
increase in 2008 at 48.04% to 53.46% in 2010 and then slightly
decline to 52.50%in 2011and to 52.59% in 2012. This shows that
profit margin was relatively higher than sales revenue.
5.2 Net Profit Margin
The net profit margin ratio relates the net profit for the
period to the sales revenue during that period. This ratio
compares one output of the business (profit) with another
output (sales revenue). In 2008 was 12.82% and marginally
increase over the five year period with an average of 18.5%
may be the cause of stabilizing the operating cost with income
received was also appreciative.
5.3 Return on capital employed (ROCE)
The return on capital employed is a fundamental measure of
business performance. This ratio expresses the relationship
between the net profits generated during a period and the
22
average long-term capital invested in the business during that
period (Atrill and Mclaney, 2006).
ROCE increase from 0.42 in 2008 to 0.54 in 2009 depicts the
company is giving shareholders more for their money, which is
represented by shareholders' equity. This then dropped to 0.36
in 2011 is caused by reduce in capital employed by management.
In 2012 the company then increase their investment due
increase in companies casflow from the customer payables.
6.1 limitations of the company (Fan Milk Limited)
The company analysis based on the accounting information makes
it limited in efficiency by distortions that is created in
the statement as a result of Historical cost computations and
Inflation. The ratio is limited how much interest income
profit is available. Also there may be hidden influences such
as how much deliverable was made.
Therefore it is also essential to recall some of the other
limitations such as:
23
Ratios does not consider things like quality product,
care of the customer, employee morale, which plays a
vital role in Fan Milk company
The company duel in the past data therefore it is
difficult to present whether the assumptions made are
real for future.
Fan Milk Company did not present any industrial bench
mark that the analysis can be based on hence ideal
situations are use making it difficult to comment on real
performance.
The ability to manipulate figure to suit delays in
creditor payment to later part of the year may not
present true picture of whether the company’s debt ratios
were viable to profit growth
6.2 Limitations associated to Ratio Analysis
Limitations of ratio analysis:
Ratios are only as reliable as the financial statements
from which they derive.
Ratios have restricted vision.
24
It can be difficult to find a suitable benchmark (for
example, another business) to compare with.
Some ratios could mislead due to the ‘snapshot’ nature of
the balance sheet.
7.1 Conclusion
After assessing Fan Milk Limited with Ratio Analysis, it was
realize that the company
Liquidity or Short term solvency ratios during the period stood
strongly by 2012 as Current Ratio (%) 1.43, Quick Ratio (%) 0.93,
Debt Collection Period (365 days) 281.58, Inventory Turnover
Period(365 days) 74.04, Inventory Turnover 0.20 this made the
company solid.)
Financial statement analysis involves analyzing the firm's
financial statements to extract information that can
facilitate decision-making. The use of accounting ratios as
one of techniques used in financial statements analysis can
guide management in decision making by playing a centre role
in measuring the strength and weaknesses of the firm. Ratio
analysis for a business enterprise like Fan Milk Limited its
efforts to derive quantitative measures or guide concerning
25
the expected capacity of the firm to meet its future financial
obligations or expectations. Based on findings, the company
gives much significance in profitability ratios, the
management staff of the company believe that, net profit
margin ratio, not only displays the profitability of the
company comparing to sales, but also the net profit ratio cans
help in expenses management. It is observed that, others
ratios like expenses analysis ratio and gross margin ratio
play a great role to determine the profitability, as gross
margin ratio decreases and the expenses analysis ratio
increases the net profit ratio decreases. There is a strong
relationship of these ratios to measure profitability of a
company in order to control expenses within the income earned
to take measures for the future financial expenses and
revenues.
Hence the company made an immersed profit over the five year
period.
7.2 Recommendation
Based on the research findings, skills of the researcher and
other constraints accounted, we can finish this work by giving
26
the following recommendations that aimed at further improve
decision making by the use of accounting ratios for the great
success of Fan Milk Limited:
1. Since the profit seems to be the same based on the periods
of this study, and this profit earned is obtained with
different sales turnover, for a better understanding of
performance and profitability in Fan milk, the company should
calculate expenses analysis ratio, gross margin ratio and net
profit ratio for each period covered. It is through this
analysis that a company can be able to assess the expenses
incurred comparing to sales realized and gross margin obtained
for a better control of production cost and other expenses.
2. The company should improve its capacity to attract
potential investors by calculating its return to equity ratio
and compare it to the result of this ratio from the firms in
same industry to test their ability to increase the equity
even from the external resources that the company can benefit
from potential investors.
3. The computation of multiple discriminate analysis should be
made at the end of each accounting period to assess the
27
historical data in order to predict the financial failure not
for Fan Milk Limited as our case study, but also for the other
business entity to verify their going concern situation.
4. The management of the company should look for the means of
disclosing company's financial statement to the professional
accountants in order to get advices and recommendations from
these experts to get the fully disclosed financial statement
on which financial analysis could be conducted in decision
making
5. As in the country there is a lack of accounting
regulations, there should settings and training for the
academician accountants so that they can fill gaps of shortage
of professional accountants in the country.
28
Reference Atrill, P. and McLaney, E. (2006) ACCOUNTING AND FINANCE for Non-
Specialists, Prentice Hall Europe
Elliott, B. and Elliott, J. (2004) Financial Accounting and Reporting,
9th edn, Financial Times Prentice Hall.
Revsine, L etal (2004) Financial Reporting and Analysis, 3rd edn,
Prentice Hall, 2004, chapter 5.
29
http://accounting-simplified.com/financial/ratio-analysis/
quick-acid test.html#sthash.B7XjDL4U.dpuf 20th August, 2014,
12pm
30
Appendix
Appendix A: Short Term Liquidity for the five year period
Long term and Short Term Liquidity for the five year period2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Current Assets 44649 39310 38861 27845 17774Current Liability 31208 17885 14530 14702 10640Inventories 15640 12679 9739 9656 6811
Current Ratio (CR) 1.43 2.20 2.67 1.89 1.67
Quick Ratio QR 0.93 1.49 2.00 1.24 1.03
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Average Receivables3147.5
011209.
002644.5
02223.5
0 -
Credit Sales4080.0
02215.0
02971.0
02318.0
0 -
31
a. Current Ratio (CR) ¿ CurrentAssetsCurrentLiability
f. D
ebtCollectionPeriod=AverageReceivablesCreditSales
∗36days
e. Inventory Turn¿AverageInventory
CostofSales
g. Creditor Payment
Period=AveragePayablesCreditPurchase
∗36days
Cost of Sales69799.
0051908.
0048293.
0038460.
0028599.
00
Average Inventories14159.
5011209.
009697.5
08233.5
0 -Debt Collection Period (365 days) 281.58
1847.08 324.89 350.12 -
Inventory Turnover Period 74.04 78.82 73.29 78.14 -Inventory Turnover 0.20 0.22 0.20 0.21 -
Creditors Payment Period
Appendix B: Activity or Efficiency Ratios
2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Sales 14721210928
0 103775 82471 55041Assets 96553 83081 68391 51114 32858Capital Employed 65345 65196 53861 36412 22218Average Receivables
1148837.5
946445
965242.5
811577.5 -
Cost of Sales 69799 51908 48293 38460 28599
Sales to Assets Ratio 1.52 1.32 1.52 1.61 1.68Sales to Capital Employed 2.25 1.68 1.93 2.26 2.48Receivables Turnover Period 16.46 18.23 19.99 21.10 -
32
Sales to Assets RatioSales to Capital EmployedInventory Turnover PeriodReceivables Turnover Period
Appendix C: Gearing or Long term Financial Stability Ratio
•Total Debts to Shareholders Fund
•Long term debt to Shareholders fund
Gearing or Long term Financial Stability Ratio Calculations2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Net profit before interest and tax
36442
25251 24693 19757 9387
Fixed interest paid or payable - - 1120 418 -preference Dividend paid or payble 9302 400 337 293 222
Shareholders fund6168
16237
2 52126 35082 21410
Total Tangible Assets4464
93931
0 38861 27845 17774
Total Debts3487
22070
9 16265 16032 11448
Total Assets9655
38308
1 68391 51114 32858
Fixed Interest Cover - - 22.05 47.27 -
33
a
.¿InterestCover=NetProfitbeforeinterest∧tax
¿interestpaid∨payable
b
.¿DividendCover= NetProfitbeforeinterest∧taxPreferenceDividendpaid∨payable
c
.Proprietaryratio=Shareholdersfund
TotalTangibleAssets
Fixed Dividend Cover 3.9263.1
3 73.27 67.43 42.28Prprietary ratio 1.38 1.59 1.34 1.26 1.20
Debt Ratio 36.12
24.93 23.78 31.37 34.84
Long term debt to Shareholders fund
Appendix D: PROFITABILITY RATIOS
PROFITABILITY RATIOS CALCULATIONS2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢
Sales14721
2 10928010377
5 82471 55041Expense 45155 33989 30774 24812 17442Net Profit (before interest andtax) 36442 25251 24693 19757 9387Capital Employed 65345 65196 53861 36412 22218Gross ProfitMargin 52.59 52.50 53.46 53.37 48.04Net Profit Margin 18.48 17.22 18.67 18.38 12.82Expense/Sales 30.67 31.10 29.65 30.09 31.69RROCE 0.56 0.39 0.46 0.54 0.42
34
a.
GrossProfitMargin=GrossProfitSales
∗100b.
NetProfitMargin=NetProfitSales
∗100%c. Expense/Sales=
ExpenseSales
∗100%