Cis11 Assessment 1

sanctuary Styles Pty Ltd mo fireary Information proportionalitys and Financial Data Profitability201020112012 pay on additions30. 2%31. 46%31. 48% yield on equity32. 62%34. 02%34. 07% Gross hit margin57. 55%57. 51%57. 93% dismiss lucre margin16. 04%13. 90%14. 35% skill Asset swage (times)1. 882. 262. 19 inventorying turnover (days)95. 6290. 5595. 10 Accounts receivable turnover (days)50. 3742. 6645. 16 Liquidity Current symmetry4. 124. 13. 91 ready asset ratio2. 462. 452. 21 Capital body structure paraphernalia ratio2. 372. 62. 54 pencil eraser Styles Pty Ltd use Decision It would be my recommendation to grant preventative Styles their application for special finance. Profitability Safety Styles Pty Ltd has demonstrated in is able to generate and cast up its profits as demonstrated through with(predicate) the healthy Gross and Net Profit delimitations. It should be noted during this three year fulfilment Safety Styles Pty Ltd has maintained and increased the G ross Profit margin, Safety Styles Pty Ltd has also maintained a healthy Net Profit circumference.Although dropping slightly the sustain year they have managed to improve this in their third year change magnitude their overall profitability Safety Styles has also increased both its authorise on Assets and Return on Equity, this demonstrates the ability of the company to efficiently prove use of its assets and equity which ultimately reduces requirements for more than funding and reduces cost do violate use of what they actually have. Efficiency Safety Styles Pty Ltd appears on second-rate over the last three years to be improving its ability to make intermit use of their assets and turning over their inscription.Safety should also taper on this area and strive to improve their efficiency. Whilst the values whitethorn reckon quiet high their total gross gross revenue amount has raised which may not be taken into account with averages. Safety Styles may posit to revis it their inventory strategy as their turn over utmost is quite high this would be a benefit for them in the broad term by having apaceer access to cash for dedicatement in other assets. They should also pay attention to their Accounts receivable turnover rate and use up to reduce this. LiquidityWhilst Safety Styles Current ratio and Quick asset ratio is declined they are both still very healthy numbers. Safety Styles non-current assets have been increasing annually. They may want to pay attention to decrease their inventory take aims and accounts receivable to give them more cash and the opportunity to invest into non-current assets or reduce their liabilities as they currently has a depressive disorder take of cash compared to inventory and accounts receivable. This will make the company more lucid in the short term.Safety Styles also has a very healthy quick asset ratio compared to the industry standard of 2. It should be noted that Safety Styles currently do not have a high level of liabilities and seem to be maintaining their levels of dent in relation to their assets Capital Structure Safety Styles currently have a very low string ratio and are using retained earnings for most of their financing. extraneous sources of financing will be a benefit to Safety Styles to do them grow and invest in additional non-current assets. Executive SummarySafety Styles appear to be utilizing their assets and equity very well currently to help produce their profit and maintain both healthy gross and net profit. If this is maintained they should be able to repay their spacious term liabilities and possibly improve their current asset liquidity. ? Appendix Formulas Return on Assets = (Net profit before invade and taxation / Average total assets) x 100 Return on Equity = (Net profit after tax and preference dividends / average normal stockholders funds) x 100 Gross Profit Margin = (Gross profit / sales) x 100 Net Profit Margin = (Net profit before interest and taxation / sales) x 100 Asset turnover rate proportionality = ( Sales / Average Total Assets) Inventory Turnover = (Average inventory / cost of sales) x 365 Accounts receivable Turnover = (Average accounts receivable / attribute sales) x 365 Current Ratio = (Current assets / current liabilities) Quick Asset Ratio = (Current assets (excluding Inventory and prepayments) / current liabilities) Gearing Ratio = (Long-term liabilities / share capital + reserves + long-run liabilities) x 100 Ratio definitions Return on Assets The Return on Assets (ROA) demonstrates how effectively a company is using its assets to generate profit. The higher the ROA the better as the company is earning more mutilate less(prenominal) investment Return on Equity oThe Return on Equity (hard roe) demonstrates the amount of net profit generated as a contribution of the shareholders equity. A higher ROE is better as it displays how much profit is generated based on shareholder investment. Gross Profit Margi n oThe Gross Profit Margin (GPM) is utilize to display the percentage difference between sales and the cost of sales before any other costs are factored in.A higher GPM is better as the company is making a higher profit off its sales Net Profit Margin oThe Net Profit Margin (NPM) is used to display the net profit as a percentage of the revenue generated. A higher NPM is better as it indicates a more profitable company and how effective a company is at domineering its costs Asset Turnover Ratio oThe Asset turnover Ratio (ATR) displays how well a business place use its assets in generating sales or revenue. A higher ATR is better as it demonstrates the amount of dollars generated by one dollar of the companys assets Inventory Turnover The Inventory Turnover aspect display how often the company sells and replaces its inventory. A low Inventory turnover is preferred as this nub cash is not being held in inventory, is producing more revenue and has access to an ongoing source of cas h Accounts Receivable Turnover oThe Accounts Receivable turnover displays the average settlement period (days) credit purchased are settled by the customer. A shorter average settlement period is preferred as this means funds are not secure up and can be Current Ratio This ratio is compares a companys current assets and current liabilities to measure the liquidity. A higher ratio is preferred as it generally means the business can meet their commitments Quick Asset Ratio oThe Quick Asset Ratio (QAR) also known as the Acid Test Ratio measures if a company can meet its short term liabilities with its current assets less its inventory as you cant always rely on inventory to be converted into cash quickly. A higher ratio means the company is in a better position Gearing Ratio The Gearing Ratio (GR) measures how much capital is financed by long term finance. A high gearing ratio means a company will depend of long term loans, a low gearing ratio displays higher reliance on financing thr ough equity investment. Typically a high level of gearing means a higher level of risk for the company. Ratio Calculations Return on Assets o2010 (647 / ((2122 + 2163) /2)) x 100 o2011 (685 / ((2233 + 2122) /2)) x 100 o2012 (712 / ((2291 + 2233) /2)) x 100 Return on Equity o2010 (585 / ((1774 + 1813) /2)) x 100 2011 (619 / ((1865 + 1774) /2)) x 100 o2012 (644 / ((1916 + 1865) /2)) x 100 Gross Profit Margin o2010 (2321 / 4033) x 100 o2011 (2834 / 4928) x 100 o2012 (2875 / 4963) x 100 Net Profit Margin o2010 (647 / 4033) x 100 o2011 (685 / 4928) x 100 o2012 (712 / 4963) x 100 Asset Turnover Ratio o2010 (4033 / ((2122 + 2163) / 2)) o2011 (4928 / ((2233 + 2122) / 2)) o2012 (4963 / ((2291 + 2233) / 2)) Inventory Turnover o2010 (((((216 + 175) + (223 + 283)) / 2) / 1712) x 365) o2011 (((((235 + 298) + (223 + 283)) / 2) / 2094) X 365) 2012 (((((235 + 298) + (230 + 325)) / 2) / 2088) X 365) Accounts Receivable Turnover o2010 ((((561 + 552) / 2) / 4033) x 365) o2011 ((((5 61 + 591) / 2) / 4928) x 365) o2012 ((((637 + 591) / 2) / 4963) x 365) Current Ratio o2010 (1257 / 305) o2011 (1324 / 323) o2012 (1272 / 325) Quick Asset Ratio o2010 (((1257 (223 + 283)) / 305) o2011 (((1324 (235 + 298)) / 323) o2012 (((1272 (230 + 325)) / 325) Gearing Ratio o2010 (((43 / (70 + 1704 + 43)) x 100) o2011 (((45 / (70 + 1795 + 45)) x 100) o2012 (((50 / (70 + 1846+ 50)) x 100)