• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

I have identified different types of ratios using financial information from the company named First communication plc. I have identified how these ratios help the user to understand the financial position and performance of the business.

Extracts from this document...


Introduction Ratios are useful because they briefly summarise the result of detailed and complex calculation. Ratios evaluate financial condition and performance of a business concern. However ratio simply means a comparison of one figure to other relevant figure. Ratios is used by internal stake holder such as managers, where they assess performance of individual branches, they monitor year to year performance, analyse relationships between revenues and expenses and so on. It is also, used by employees whereby they use it to negotiate wages and conditions, assess security of firm and therefore own a job etc. It is also, used by external stakeholders such as customers and creditors. Creditors assess security of the firm and decide on credit terms offered Liquidity ratios Liquidity ratios provides information about the company's short term financial circumstances, this states the extent to which a firm is able to pay off its debt therefore, it will measure whether the business has enough money to pay its bills. ...read more.


As you can see that the ratio is improving as it is higher, this means that the business deals in fast consumer goods Average Settlement period for debtors = Trade debtors x 365 Credit sales 2008 2009 260.5 X 365 = 75 days 11.9 x 365 = 3 days 1265.4 1391 In this one they have in 2008 they have 72 more days of average settlement period of debtors than 2009 Investor ratios These usually used by investors to assess the performance of the business as an investment. This will show how much the returns was in assets, capital and equity Dividends yield = dividends per share x 100 market value per share 2008 2009 0.075 X 100 = 1.9% 164.62 X 100 = 3.5% 4 668.2 The dividends yield in 2008 was 1.9% and in 2009 was 3.5%. Therefore, this is better than putting in the bank. ...read more.


and in 2009 is 4.2, therefore the company has improved because; if it was higher percentage then higher the business risk and ultimately the more money that is paid out in interest on long term debt. Interest cover ratio = profit before interest and taxation interest payable 2008 2009 494.5 = 20.6% 314.4 = 50.7% 24.0 6.2 As you can see here in 2008 was 20.6% and 2009 is 50.7%. According to this calculation we can see that in 2009 has higher percentage, having a higher percentage means that the business has the ability to meet its interest obligations from profits. If the ratio was lower that would mean that the business is in danger of not being able to meet its interest obligation Conclusion I have identified different types of ratios using financial information from the company named First communication plc. I have identified how these ratios help the user to understand the financial position and performance of the business. ?? ?? ?? ?? Abubakar Habib P6/M3 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a teacher thought of this essay

3 star(s)

There are some good points in this essay but too many errors in facts and calculations. Without the balance sheet and profit and loss statement it is hard to see what figures should be used but there is no consistent use of the figures e.g. share capital could be 4614 or 461.4. Are these thousands, millions or just pounds?

Marked by teacher David Salter 07/02/2012

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Evaluate the adequacy of accounting ratios as a means of monitoring business health in ...

    Profitability ratio: This is the first aim and objective of a business so that the business is in a long duration of a business. Generally the profit ratio will show if the business is able to meet its objectives by examining the calculations, for example, investments.

  2. Maynard Company Balance Sheets a of June 1 and June 30 compared.

    Question 3: Why do Retained Earnings not Increase by the amount of June net Income? Answer: Retained Earnings is the accumulated profits of the company less paid dividends, In Maynard Company's case, It earned a Net income of $19,635 at the end of June 30,

  1. compare and contrast financial and management accounting

    He argues that the greatest benefit that would flow from harmonization would be the comparability of international financial information as such comparability would eliminate the current misunderstandings about the reliability of "foreign" financial statements and would remove of the most important obstacle to the free flow of international investment He

  2. Explain the difference between capital income, revenue income, capital expenditure and revenue expenditure.

    They will be protected from events such as floods. Public liability insurance- this insurance will be taken out by Future Fashion to protect people within the building who may be harmed during an incident. Administrative costs Administration is all about paperwork within the Future Fashion such as paperwork regarding employees, suppliers and customers.

  1. Describe the purpose of accounting for an organisation. The organisation I have chosen is ...

    They will have to control their money as is important the right amount of money goes in and out of the business.

  2. Use accounting data and statistical information to measure business performance

    It is highly important for Mr Jones? business to constantly monitor these costs to ensure it is aiming at efficiency and cost-effectiveness of production. The retail price index (RPI) and the consumer price index (CPI) are both measures of the price of goods and services in the UK.

  1. Reflective report - Introduction to Financial Accounting

    In my opinion, mastering this skill essentially is very necessary for my future careers. I think the future financial professional is not limited in numeracy skills. The reason is this area is requiring the accountant have ability to be able to explain and analyze the transactions, mastering numeracy skills is

  2. I am going to produce a report which assesses the working capital management of ...

    Trade receivables are shown on the balance sheet under the current asset section. Inventories (Stock): inventories are products or merchandise owed by a business that has not yet been sold. These are current assets because as part of the normal trading activities of a business, inventory will be expected to be sold off within a year to generate income.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work