Assessment of Financial Performance and Position of PQR

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Assessment of Financial Performance and Position of PQR The report that will follow will outline the financial performance of PQR for the past 3 years. The Company’s financial statements will be reviewed from 2002 till 2004 in order to obtain a picture of the company’s financial position. The company’s performance has been illustrated via Ratio Analysis. A detailed calculation of various ratios is obtainable from the appendix. However a summary table has been included below for reference. RATIOS 2002 2003 2004 PROFITABILITY RETURN ON CAPITAL EMPLOYED % LIQUIDITY CURRENT RATIO QUICK RATIO EFFICIENCY DEBTORS DAYS CREDITORS DAYS STOCK DAYS 12.1 4.3 1.5 61 33 136 12.7 3.5 1.8 48 48 107 13.0 2.6 1.3 47 44 81 The report will be split into Profitability, Liquidity and Efficiency, under which the company’s financial statements will be analysis to some degree. The conclusion will bring the report together. PROFITABILITY As can be seen from the data supplied sales have increased from £3,600,000 to £4,010,000, an increase of 11%. Calculation based on the difference between 4,010 and 3,600, over 3,600. At the same time cost of sales fell. We can straight away tell the company’s gross profit has also increased. Taking these into account, we are able to calculate the Return on capital employed (ROCE), which for 2002 is 12.1, 2003 figures are better but 2004 are even better (13.0), showing the company is making use of its assets. An... ... middle of paper ... ...ks. Probably the most important aspect of using ratios is that they do not give the answers to the assessment of how well the company has performed, they only raise questions. Ratio analysis allows managers to change figures, making users think a favourable position has arisen. Another drawback is there are various definitions to accounting ratios, different components can be applied. Therefore its reliability can be questioned. In the end there is no right or wrong answer to the analysis of ratios, various calculations can be carried out. On its own it cannot be considered to be enough in terms of interpreting a company’s financial statements. An overall picture of the company is okay, improvements have been made especially with the efficiency ratios. Profitability and liquidity ratios seem quite stable.

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