665.1 = 2.3 451.7 = 1.10
First communication result in 2008 is 2.3 in 2009 is 1.10 2009 it was 1.10. According to this result 2008 was better than 2009.
This would provide an indication of a firm’s receivable and how efficiently it uses and control its assets and pay their suppliers. The major efficiency is total asset turnover, which measures the effectiveness of the use of all firms’ assets.
Stock Turnover Period = Average stock held x 365
Cost of sales
First communication plc efficiency ratio is as follows
280.5 X 365 = 58 days 340.4 x 365 = 60 days
In 2009 the dept was held for 2 days more than 2008. 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
260.5 X 365 = 75 days 11.9 x 365 = 3 days
In this one they have in 2008 they have 72 more days of average settlement period of debtors than 2009
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
0.075 X 100 = 1.9% 164.62 X 100 = 3.5%
The dividends yield in 2008 was 1.9% and in 2009 was 3.5%. Therefore, this is better than putting in the bank.
Profitability ratio used to measure the business ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time
First communication plc profitability ratio
Return on owners equity = Net Profit after taxation
(ROE) Ordinary share capital plus reserves
362.3 x 100 = 58.69% 237.3 x 100 = 51.43%
617.3 = 59% 461.4 = 51%
From the First communication plc’s profitability ratios calculation you will discover that the owner’s equity has decreased over the year period. Therefore, in 2008, the return of owner’s equity was 59% while in 2009 is 51%.
This is a total debt divided by the share holders funds multiplied by 100 to get a percentage. When the percentage is higher it would be a problem because in on this recession times companies cannot get banks to revolve over existing debts.
Gearing ratio = long – term liabilities
share capital + reserves + long term liabilities
200 X 100 = 24.7% 20 X 100 = 4.2%
617.3 + 200 4614+20
In 2008 the percentage was 24.7% 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
494.5 = 20.6% 314.4 = 50.7%
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
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.
Here's what a teacher thought of this essay
*** 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?