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Introduction

I am writing a report to analyse the performance of Benedon Limited Company and to compare with the industry as a whole. The report analyses company and industry performance over the three years up to at end of 20X3. "It enables us to discover favourable or unfavourable trends that are developing gradually over time, as well as pointing up any numbers that have changed sharply in the space of time of just one year." (Sytsma, S.) This report reviews the findings of the major changes and the awareness of weak performances. However, there are five principal types of ratios which are profitability ratios, liquidity ratios, activity ratios, solvency ratios and investment ratios. Under profitability, competitive pressure has risen in 20X3 compared to 20X1 and 20X2 as a result of Return on Capital Employed (ROCE) fell in year 20X3 from 19% to 14.7%, however, the ROCE in the year 20X3 is better than year 20X1 which had 13.2%. Gross margin (GM) could not be increased and falls substantially throughout the years as percentage of sales from 43.8% to 36.6% even though distribution and administration expenses have lowered every year. ...read more.

Middle

Although the stock days have reduced from 62 days in the year 20X2 to 51 days in 20X3, the debtor days have raised significantly to 198 days in year 20X3. It is possibly due to Benedon Limited is not able to sell their goods to customer or the company is giving long term credits to customers. On the other hand, the creditor days have reduced 36 days at the end of the year 20X3 which has not given any penalty from finance facilities due to early repayment. It can be a result of illiquidity of cash flows as mentioned above. Therefore, the overall working capital management is poor. 'Gearing is the ratio of long-term loans and preference shares shown as a percentage of total shareholders' funds, long-term loans, and preference shares.' (Frankwood, p.579) Benedon Limited is taking high gear in the year 20X3 compared to the previous year as the interest they have to cover is 3.33%. Benedon Limited with a high gearing ratio will be a company which has a high level of debt and a relatively low level of equity. ...read more.

Conclusion

Table 1.1 Workings 20X1 20X2 20X3 ROCE 97 � 737 = 0.132 135 � 709 = 0.19 133 � 904 = 0.147 = 13.2% = 19% = 14.7% Gross Margin 307 � 701 = 0.438 359 � 837 = 0.428 375 � 1025 = 0.366 = 43.8% = 42.8% = 36.6% Operating Margin 97 � 701 = 0.138 135 � 837 = 0.161 133 � 1025 = 0.13 = 13.8% = 16.1% = 13% Current Ratio 174 � 176 196 � 110 239 � 265 = 0.99 = 1.78 = 0.90 Stock days 41,000 � 190,000/365 43,000 � 253,000/365 47,000 � 335,000/365 = 79 days = 62 days = 51 days Debtor days 123,000 � 701,000/365 116,000 � 837,000/365 176,000 � 325,000/365 = 64 days = 51 days = 198 days Creditor days 43,000 � 187,000/365 45,000 � 255,000/365 25,000 � 325,000/365 = 84 days = 64 days = 28 days Gearing 386 � 351 300 � 409 460 � 444 = 1.1 = 0.73 = 1.04 P/E 3.49 � 0.23 3.49 � 0.39 3.49 � 0.34 = 15.20 = 8.90 = 10.26 ?? ?? ?? ?? 1 Melissa Lim/214RORO CF03/BBS4/FM/Vijay Shenai ...read more.

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