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846 words - 4 pages

Interpreting Financial Results

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Liquidity Ratios

Current Ratio

Current ratio is a financial ratio applied in investigating the working capital position of the company. It is derived by dividing the current assets by the current liabilities as shown by the formula below;

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Therefore Current ratio

|2010 |2009 |
| 21,374,000/9,815,900 | 20,769,000 /11,667,000 |
...view middle of the document...

15 |=0.11 |

The company records profitability of over 10% and from the calculation it is an indication that the profitability is on uptrend.

Net Profit Ratios

This ratio of profitability is found by the formula;

[pic]

|2010 |2009 |
| 3,022,000 / 121,592,000 | 3,963,000 /200,062,000 |
|=0.025 |=0.020 |

The net profit margin of the company is less than 5% indicating the company needs to devise means of minimization of expenses.

Return on Assets

This ratio shows that the company efficiency in management of the assets of the company in realizing profit. This is found by the formula;

[pic]

|2010 |2009 |
| 3,022,000 / 22,294,900 | 3,963,000 / 21,067,000 |
|=0.14 |= 0.19 |

The business has recorded positives returns from the assets of the company which is an indication of the management’s efficiency in the use of assets to generate returns.

Return on Equity

The ratio shows the company’s efficiency in utilizing the shareholders equity for better returns for the shareholders. The formula;

[pic]

|2010 |2009 |
| 3,022,000 / 12,385,000 | 3,963,000 / 9,363,000 |
|=0.24 |=0.42 |

The business has shown prowess in the use of shareholder’s investments to generate better returns. The two years indicate positive returns from the shareholder’s equity.

Debt Ratios

The debt ratio is found by comparing the company’s total debt to the total assets. High ratio shows that the company is highly vulnerable to the market risks. This is found by the formula;

[pic]

|2010 |2009 |
| 22,712,900 /22,294,900 | 21,170,000 /21,067,000 |...

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