Cis11 Assessment 1

Safety Styles Pty Ltd Financial Information dimensions and Financial Data winnings business leader201020112012 guide on assets30. 2%31. 46%31. 48% chip in on equity32. 62%34. 02%34. 07% pure(a) do good margin57. 55%57. 51%57. 93% loot get ahead margin16. 04%13. 90%14. 35% strength Asset turnover (times)1. 882. 262. 19 stock certificate turnover (days)95. 6290. 5595. 10 Accounts receivable turnover (days)50. 3742. 6645. 16 Liquidity ongoing ratio4. 124. 13. 91 energetic asset ratio2. 462. 452. 21 Capital Structure cogwheel ratio2. 372. 62. 54 Safety Styles Pty Ltd Application Decision It would be my recommendation to concession Safety Styles their application for superfluous finance. net shekelsability Safety Styles Pty Ltd has demonstrated in is able to generate and increase its profits as demonstrated by means of the healthy Gross and crystallise Profit metes. It should be noted during this triplet year period Safety Styles Pty Ltd has maintained and increased th e Gross Profit margin, Safety Styles Pty Ltd has also maintained a healthy Net Profit security deposit.Although dropping slightly the second year they start out managed to mend this in their third year increasing their overall profitability Safety Styles has also increased both its Return on Assets and Return on Equity, this demonstrates the ability of the company to efficiently suffice use of its assets and equity which ultimately reduces requirements for to a greater extent funding and reduces cost making cleanse use of what they before tenacious have. Efficiency Safety Styles Pty Ltd appears on honest over the last three days to be improving its efficiency to make offend use of their assets and turn of events over their inventory.Safety should also focus on this area and strive to improve their efficiency. Whilst the values may seem quiet gamyer their total piggy revenue amount has raised which may not be taken into work out with averages. Safety Styles may need to revisit their inventory strategy as their turn over period is quite high this would be a benefit for them in the long margin by having quicker admission fee to change for investment in other assets. They should also pay direction to their Accounts Receivable derangement and aim to reduce this. LiquidityWhilst Safety Styles online ratio and Quick asset ratio is declined they are both quiet very healthy numbers. Safety Styles non- occurrent assets have been increasing annually. They may privation to pay attention to reducing their inventory levels and accounts receivable to give them more than immediate payment and the opportunity to invest into non-current assets or reduce their liabilities as they currently has a low level of cash compared to inventory and accounts receivable. This will make the company more liquid in the succinct term.Safety Styles also has a very healthy quick asset ratio compared to the industry measuring stick of 2. It should be noted that Safety S tyles 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 accommodate ratio and are victimisation bear earnings for most of their financing. External sources of financing will be a benefit to Safety Styles to help 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 long term liabilities and possibly improve their current asset liquidity. ? Appendix Formulas Return on Assets = (Net profit before interest and tax revenueation / Average total assets) x ascorbic acid Return on Equity = (Net profit after tax and preference dividends / average ordinary dish outholders pecuniary resource) x carbon Gross Profit Margin = (G ross profit / sales) x degree centigrade Net Profit Margin = (Net profit before interest and taxation / sales) x 100 Asset overturn proportion = ( Sales / Average complete Assets) Inventory Turnover = (Average inventory / cost of sales) x 365 Accounts Receivable Turnover = (Average accounts receivable / credit sales) x 365 real balance = (Current assets / current liabilities) Quick Asset Ratio = (Current assets (excluding Inventory and prepayments) / current liabilities) Gearing Ratio = (Long-term liabilities / share capital + reserves + long-term 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 off-key less investment Return on Equity oThe Return on Equity (ROE) demonstrates the amount of net profit generated as a destiny of the shareholders equity. A higher ROE is better as it displays how overmuch profi t is generated based on shareholder investment. Gross Profit Margin oThe Gross Profit Margin (GPM) is used to display the percentage difference amidst sales and the cost of sales before any other be 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 controlling its costs Asset Turnover Ratio oThe Asset turnover Ratio (ATR) displays how well a business thunder mug 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 formula display how often the company sells and replaces its inventory. A low Inventory turnover is preferred as this means cash is not being held in inventory, is producing more revenue and has access to an ongoing source of cash 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 tied 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 loosely means the business can meet their commitments Quick Asset Ratio oThe Quick Asset Ratio (QAR) also known as the acidic 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 loan s, a low gearing ratio displays higher confidence on financing through equity investment. Typically a high level of gearing means a higher level of chance 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 Rece ivable Turnover o2010 ((((561 + 552) / 2) / 4033) x 365) o2011 ((((561 + 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)