THE STOCK VALUATION

The Stock valuation



The Stock valuation

Evaluation

Profitability Ratios

The profitability of Tobermoray Ltd. is satisfactory as the trends of the company from 2004 to 2005 shows that the company has been gaining profits. This statement can be endorsed by the evaluation of the profitability ratios. The return on assets of Tobermoray Ltd. from 2004 to 2005 is reflecting that profitability structure of the company is raised from 7.09 to 9.86. In addition to this, return on equity shows decline over the 2 years. As the return on equity was 297.9 in 2004 and 133.33 is in 2005. In addition to this, return on investment and operating profit margin is also showing the increase in the profitability structure of Tobermoray Ltd.. Furthermore, the operating profit margin shows an increase over the years. The operating profit marginwas 6.63 in 2004, whereas it increases in 2005 to 33.6. This could be as a result of increase in the gross profit margin.. Besides it, the tax rate is reached to 25.87 from 0 which seem to be a positive sign for the Tobermoray Ltd., and the over all performance of the company is satisfactory.

Liquidity Ratios

The liquidity ratios that include current ratio, quick ratio and net current assets as a percentage of total assets are increased from 2004 to 2005. This shows that the liquidity position of the Tobermoray Ltd. is satisfactory. The current ratio increased from 0.4 to 0.49 from 2004 to 2005 respectively and the quick ratio increased from 0.32 to 0.42 from 2004 to 2005; this shows that the goods sold are partially financed by suppliers (creditors). In addition to this, the net current assets as a percentage of total assets increased from (21.91) in 2004 to (17.13) in 2005. This is mainly because there is little asset compared to liabilities of the firm. Inventory and receivable days are also very short, and extra cash is quickly re-invested in acquiring stock or carrying out expansion plans. Sales are mainly on a cash and carry basis.

Assets Management Ratios

The assets management ratios that are the efficiency ratios of Tobermoray Ltd. are very much supportive. The reason of this statement is that the turnover of the company is in favour of Tobermoray Ltd.. The total assets turnover period was relatively stable over the period under review; this shows efficient working capital management especially in terms of lead times. In addition to this, the Receivables Turnover of the company is increased; however the Accounts Payable Turnover of Tobermoray Ltd. is also increased. The accrued expenses turnover is decreased to 4.83 in 2005 from 5.18 in 2004.

Debt Management

The long-term debt to equity, total debt to equity is decreased, whereas interest coverage ratio of Tobermoray Ltd. is increased, but the company's debt management structure shows a positive indication, this is mainly due to decrease in debt significantly. The debt ratios of Tobermoray Ltd. establish the relationship among debt, equity and the total assets of a company (Adams, 2006, pp. 87-94).

Per Share or Investor Ratios

Cash Flow per Share

The ...