MSc Managerial Finance RESIT ASSIGNMENT JUNE 2013

MSc Managerial Finance RESIT JUNE 2013 - Assignment ExampleRatio analysis is considered to be a very accu tell and reliable tool when it comes to analyzing and interpret the pecuniary outlook and performance of an entity. The main reason for performing a ratio analysis is to evaluate the results of the monetary operations of an entity and analyze them in the light of financial performance of the prior year(s) in order to assess different aspects of the financial feasibility. Peavler, R. (2001) The financial ratios ar usually divided into various sub categories such as profitability, gearing and liquidity, each put emphasis on a different area of the financial outlook of the organization. These analyses form an integral part of the financial statement analysis, especially from the investors point of view, which are always looking for avenues to invest in countries having beef up and stabilized financial ratios and representing an upward trend. It is of great significance that the ratios must be benchmarked against a standard in order for them to possess a meaning. Keeping that into account, the equality is usually conducted between companies portraying same business and financial risks, between industries and between different time periods of the same company. Investopedia.com (2012 The financial ratio performance of The peppy Group Plc has been evaluated for the last iii years in order to d piercing attention to various financial trends and significant changes over the period. The analysis is divided into three main categorize namely gainfulness, Liquidity and Gearing. Profitability ratios identify how efficiently and effectively a company is utilizing its resources and how successful it has been in generating a desired rate of return for its shareholders and investors. Liquidity ratios measure the ability of the company to quickly convert its asset into liquid cash to settle its short term liabilities. Whereas, the Gearing ratios identifies the resul t to which the company is financed through debt and to what degree the operations are being conducted from the finance raised through raising equity capital or otherwise. For the purpose of financial ratio analysis, the financial year from 2011-2009 has been evaluated in order to analyze the financial outlook of The GAME Group Plc. The information has been extracted from the annual report of the company. Profitability Ratios 2011 2010 2009 Profitability Ratios Gross profit margin 26.30% 27.80% 26.14% Net profit margin 1.75% 5.00% 6.31% ROI 2.33% 9.23% 11.48% ROCE 4.79% 18.24% 29.22% Gross profit margin is an analyzing tool which assists in identifying how effectively and efficiently the company is utilizing its raw materials 1, variable cost related to labor and fixed costs such as rent and depreciation of property plant and equipment. The ratio is calculated by dividing the sales revenue by the gross profit. If we analyze the gross profit margin trend of The GAME Group Plc it app ears that there is decline in the component part over the last financial year. The gross profit margin was the lowest in the financial year 2009 when the gross profit