ACCOUNTING ASSIGNMENT

Accounting Assignment

Part A

To work out the ratios for Floater Plc, we need to use the specified formulae for each of the 14 ratios. The working of ratio figure is done in the appended excel sheet. The formulae presented here shows how we arrive at the figure for each of the ratios. A brief description of each ratio is hereby provided, and the final results are merged into the specified template for ratio analysis. A short comment is provided with each of the ratio, reflecting on the trends of the company'

Return on Capital Employed (Reveals the return earned by the business from the long term capital used)

Calculated as Profit before interest and tax x 100%

Capital, reserves and long-term liabilities

Return on Equity (Reveals the return (profit) produced for the ordinary shareholders)

Calculated as Profit available to ordinary shares x 100%

Share Capital + Reserves

Asset Turnover (Reveals the sales generated from the long term capital used)

Calculated as Sales(x 100%)

Capital, reserves and long-term liabilities

Operating Profit Margin (Net Profit Percentage) - Reveals the operating profit earned by the business from each £ of sale

Calculated as Profit before interest and taxx 100%

Sales

Gross Profit Margin (Reveals the gross profit earned by the business from each £ of sale)

Gross profit x 100%

Sales

Current ratio (Reveals the extent to which current assets covers current liabilities)

Calculated as Current assets: Current liabilities

Quick Ratio or Acid Test (Reveals the extent to which current liabilities could be covered by current assets excluding stock)

Calculated as Current assets less stock: Current liabilities

Debtor (Receivables) collection period (Reveals how long (days) it takes to receive payment from customers)

Calculated asTrade debtors x 365 or Trade receivables x 365

SalesTurnover

Creditor (Payables) payment period (Reveals how long (days) the business takes to pay its suppliers (note if purchases not shown then use Cost of sales).

Trade creditors x 365 or Trade payables x 365

PurchasesPurchases

Stock turnover/stock days/( Reveals number of times stock (inventory) is sold during the year

Cost of sales

Average stock

Capital gearing (Reveals the amount of capital sourced from prior charged capital.)

Calculated as: Non-current Liabilities x 100

Share Capital + Reserves +Non-current liabs

Interest cover (Reveals the extent to which profits are absorbed by interest charges)

Calculated as Profit before interest and tax(x 100%)

Interest charges

Dividend Cover (Reveals the number of times dividends could be paid out of available profits.)

Calculated as Profit after interest and tax (x 100%)

Dividend (in income statement)

Earnings per share (EPS) Reveals profit earned for ordinary share issued

Calculated asProfit after tax and preference dividend

Number of ordinary shares

The above formulas are used to calculate below financial ratios of Floater Plc, using financial statements in appendix.

Ratio

2009

2010

2011

Comment

ROE

0.33%

0.16%

-0.12%

 The ROE of Floater Plc was positive for the years 2009-2010. However, the ROE for 2011 is negative, reflecting the net loss of the company in this year.

ROCE

0.32%

0.18%

-0.02%

 Return on capital was 32% for year 2009; it went drastically down to 18% in 2010, and in 2011, it reported negative due to poor earnings.

Asset Turn

4.95

3.61

2.89

 The company registered sales fall over the period 2009-2011. At the same time its assets position remain the same, implying reduction in Asset ...