6N4165 Assignment: Financial Performance Analysis and Ratio Evaluation for an Electrical Engineering Business

Assignment Brief:

(a)The following are the results of an electrical engineering business for y/e 31st December
2009 and 2010:

Trading/Profit and Loss Account for Year-End 31st December

Current Liabilities as below:

Current Assets 2009: (Stock+Debtors+Bank): €28500
Current Liabilities 2009: (Creditors): €20000

Assignment Requirements A & B:

A. Calculate the following ratios and analyse and comment on the financial performance of the
business for both years:

(i) Working Capital Ratio (Current Ratio)

(ii) Liquidity Ratio (Acid Test Ratio)

iii) Stock turnover (Discuss both methods, i.e. times per year for stock turnover and
alternative method to calculate days elapsed between stock turnovers)

(iv) Gross Margin

(v) Net Margin

B. A company is financed in the following way for two successive years:

(i) Calculate & comment on the Return on Capital Employed (ROC) for both years.

(ii) In addition to analysis of the above ratios what other factors may influence the financial
performance of a business?

(iii) Make detailed recommendations to achieve improved financial performance in future
years.

(iv) Calculate and compare the gearing structure of the company in 2008 with that of 2009.

It is important to demonstrate in both parts (A&B) the workings for your calculations and how
you arrived at overall results.

Marking Scheme: