A critical analysis of Liquidity, Profitability and Efficiency

A critical analysis of Liquidity, Profitability and Efficiencythe sedulousness medium of string up ratio is 2.21. association A is showing bettor current ratio of 2.63 as comp ard to patience average of 2.2 which mean that the high society A bears a greater ability to paid its bills . Company B and C have slight current ratio as comp atomic number 18d to the industry average which core that the performance of these companies are not up to standard merely confederation Cs current ratio is slightly greater than the industry average which shows that the performance of company C is satisfactory.The industry average of quick ratio is 1.5 whiles the average quick ratios of companies A B and C are 1.99, 1.54 and 1.71 separately which shows that the said companies posses a greater ability to profit their bills barely only the company D quick ratio is slightly little than the industry average ratio which is 1.48 which mean the company needs to go over its liquidity plans .PRO FITABILITYThe industrys average of ROCE is 15% and the average ROCE of companies A Is 19.3%, company B is 21.26%, company C is 28.24% and company D is 31.13 which means that the companies are earning a good return on their capital employed.Company C and D consummate(a) salary ratios are 53.14% and 56% which are relatively better than the industrys average of 48% up to now company B gross profit ratio is 48% which equals the industrys average but company A GP ratio is 43.75% which is less(prenominal) than the industrys average. It is suggested that the company A should reduce its terms of sale or increase its sales revenue.The industrys average of operate profit ratio is 40% unfortunately company A and B two have low operating profit ratio which are 33.75% and 38.28% respectively which indicates that both companies A and B has low control in their operating expenses on the early(a) handcompanies C and D have better operating profit ratios which are 46.63% and 48.73 showing th at the management of both companies bears a good control on their expenses.EFFICIENCYCompanies A B and C have high stock turn over which are 63.88, 75.43 and 71.22 whole three companies exceeds the industrys average of 35 days which means that there could be a problem in their demand and supply due to which companies account is not easily converted into finish goods hence there are not able to effectively sale their products.Note Company D stock turn over ratio arsenot be calculated because of inaccessibility of required data.The industrys average of total swage ratio is 0.9 time and in this regard all the four companies have good total turnover ratio which are 0.95, 0.93, 1.01 and 1.06 showing the good return on their assets. coronationThere is no such parameter by which one drop compare the earning per share with the industrys standards. However we can compare EPS among the four companies that EPS of companies C and D are 0.98 and 0.88 is comparatively good than the companies A and B of 0.54 and 0.56 respectively.As far as the position of best company is concerned company D is said to be the best company because of better ROCE 31.13 which means the company is earning highest profitability, EPS 0.88 indicated earning per share is very good and dividend cover 3.68 the shareholders of the company receiving bragging(a) dividend. settle 1 (B)Company D shows a good catch up with for the shareholders because its earning per share is higher is 0.88 as compare to other companies like A and B but slightly less to company C which EPS is 0.98 however company D also have better dividend cover of 3.68 which depicts that it is remunerative its shareholder more than any other said company pay however company C once again a commodious rival in payment of dividend has a dividend cover of 3.38.On the other hand management of company D plays a remarkable situation in utilising the shareholders funds hence reducing the recollective-term liabilities extract because of less long term liabilities company D also has to pay less amount of interest on these loans as compare to other companies. then it is suggested to invest in company D from shareholder perspective. help 2(a) settle 2 (A)CRITICAL ANALYSISThe net present lever is a discounted cash flow approach to capital budgeting. The net present range (NPV) of an investment proposal is the present pry of the proposals net cash flow less the proposals initial cash outflow. If an investment projects net present value is zero or more, the project is accepted, if not, it is rejected. In this case of Tridad ltd the NPV is -6384.24 which means the value is less than zero therefore the project is not viable for the company.ANSWER 2(B)The internal rate of return is 13%ANSWER 2(C)If a refinancing option (overseas loan) were to be taken then there are many risks that the company might face likeFINANCIAL RISKSforex riskhedgesoverseas government activity policiesWAYS TO DEAL There are couple of ways which can be use to deal with the said financial risksLoan with placed interest rateBuy futures which will give the company assurity of the evaluate future cash outflow- Reduces uncertainty and any cash problems that could be use due to this.ANSWER 3(A)Proposed profit 91,552 Proposed profit 78,832Break-even hours 1,393 Break-even hours 1,574Break-even Sales 208,955 Break-even Sales 340,000ANSWER 3 (B)Boris Plc has an operating profit of 91552 in scenario 1 and 78832 in scenario 2 at the sale turnover of 345600 and 497664 in scenario 1 and 2 respectively. For achieving the break-even at least 1393 hours in scenario 1 and 1574 hours in scenario 2 have to be sold out so that variable cost can be discover.Break-even techniques are based on marginal costing therefore persistent cost plays a significant role companys operating results and performance. In the long haul fixed cost needs to be fully observed hence absorption costing approach is critical to be think in the long term decision m aking plan.