Financial Ratio Analysis Harry’s Hamster Limited

2471 words - 10 pages

Example Finance EssayFinancial Ratio Analysis - Harry's Hamster LimitedFinancial statements are useful as they can be used to predict future indicators for a firm using the financial ratio analysis. From an investor's perspective financial statement analysis aims at predicting the future profitability and viability of a company, while from the management's point of view the ratio analysis is important as it helps anticipate the future conditions in which the firm should expect to operate and facilitates strategic decision making (Brigham and Houston 2007, p. 77).Profitability analysisHarry's Hamsters Limited (HHL) experienced growth in its profitability from 2007 to 2008; however, the net income reduced significantly during 2009. The return on equity (ROE) was 4.24 percent in 2007, increased to 14.68 percent in 2008 and decreased back to 5.10 percent in 2010. Similarly, the return on assets (ROA) also initially increased and later declined in 2009; the decline was sharper compared to the decline in ROE as the ROA in 2009 of 1.73 percent is lower than 2.08 percent in 2007. The ROE comprises of two main components: the return on net operating assets (RNOA) and the return on debt (ROD). RNOA for HHL has also deteriorated during 2008 decreasing from 16.61 percent in 2008 to 5.08 percent in 2009. The RNOA is used to weigh the overall performance of the HHL management. The ROD component of the ROE has also deteriorated from 13.68 percent in 2008 to negative 3.32 percent in 2009 (Kemsley 2009, pp. 12-16). The ROCE was the highest in 2008 estimated 11.39 percent. It implies that the capital employed by HHL yielded high returns before the expansion period and that the company was significantly profitable. A considerable decline in 2009 to 4.82 percent can be unfavourable for the investors; however, as the company has not sold its shares to the public a reduction in this ratio for a temporary period is not a major concern for the current owners. The operating profit margins for HHL initially increased from 10 percent in 2007 to 17.45 percent in 2008; however, the company reported lowered margins of 8.53 percent in 2009. The decline in the operating profit margins of HHL is largely attributed to the increase in costs associated with the expansion of the business. The operating margins are expected to recover over the next year assuming that the new operations will become profitable as sales increase. The cost of goods sold have increased in absolute terms but the overall gross profit margins for the company have improved from 35 percent in 2007 to 42.01 percent in 2009. This implies that the company is effectively managing its relations with suppliers and has kept a control over the costs attached to buying the hamsters for breeding; but the operating costs have increased due to the low sales activity in the new operations.Liquidity analysisThe current ratio of HHL remains above the minimum threshold of one and is currently 1.22; historically, the ratio has...

Find Another Essay On Financial Ratio Analysis - Harry’s Hamster Limited

General Motors - Financial Ratio Analysis

1283 words - 5 pages General Motors - Financial Ratio Analysis I. General Motors History Highlights In its early years the automobile industry consisted of hundreds of firms, each producing a few models. William Durant, who bought and reorganized a failing Buick Motors in 1904, determined that if several automobile makers would unite, it would increase the protection for the group. He formed the General Motors Company in Flint, Michigan, in 1908

Financial Ratio Analysis of Microsoft

889 words - 4 pages long-term investments as to their shareholders' pocket. Microsoft has good financial standing and controls a lot of the computer industry.2.Efficiency RatiosAsset turnover ratio and net income per employee are good measures for a company's efficiency. The former ratio shows management's ability to use assets to produce sales, while the latter indicates the employee's productivity. If either of these two ratios is low, inefficiency may be an

ADC Tellecommunications Financial Ratio Analysis

1519 words - 6 pages ADC Tellecommunications Financial Ratio Analysis Corporate Background      ADC Telecommunications (ADCT) is a communication equipment manufacturer located in Minneapolis, Minnesota, USA. Since 1952, the company has successfully weathered the tumultuous transformation process of technology. Today, ADC Telecommunications exclusively focuses on manufacturing computer-networking equipment. Increasing demand for fiber optic transmission systems

Johnson and Johnson financial ratio analysis

1405 words - 6 pages and markets products for hospitals, diagnostic laboratories and clinics. According to the company’s own website,, it has more than 250 Johnson and Johnson operating companies which employs approximately 120,500 men and women in 57 countries and sell products throughout the world. Johnson and Johnson was ranked 32nd on the 2006 Fortune 500. Below is an analysis of Johnson and Johnson’s financial ratio analysis:Long Term Debt ratio is a

Financial Ratio Analysis of two companies

3173 words - 13 pages Company In a Different Industry12Changes in Assessment Method12Conclusion13References14Appendix A - Sample Company's Financial Statements from 1999 - 200115Appendix B - Financial Ratio Analysis of Sample Company19AbstractThis research paper will evaluate Sample Company using review standard financial ratio analysis techniques and assess its potential as a good investment. This is written in the form of a memo to the CEO of an Alabama-based firm

Financial Ratio Analysis of Metalrax Plc

1689 words - 7 pages 200520042005Dividends Per Share5.40p5.40pDividends Cover1.20.8Dividends Yield6.21%6.89%Earnings Per Share7.61p3.68pPrice/Earnings Ratio11.7311.437.Metalrax VS VitecIn this section, some ratios of 2005 are selected for briefly comparing performance and financial position between Metalrax Group plc and Vitec Group plc, which business scale is twice bigger than Metalrax.As ROCE, gearing ratio and earning per share of Vitec is larger than that of Metalrax, it shows

ratio analysis of financial statements - UCL/finance - research paper

1157 words - 5 pages Walmart Ratio Analysis Ratio analysis enables scale to be determined and for comparison against similar firms within a given time frame. It is also done drawing references from a company’s financial statements. Walmart is a multinational retailing company whose mission is to be one of the top global producers as well as a provider of these services. It is important that both internal and external users have adequate knowledge of a company

An Analysis of Financial Statement of Mandya Milk Union Limited

1465 words - 6 pages analyze the financial statements. Ratio analysis, comparative and common size, ternd analysis are used and to adopt the Statistical techniques. Period of the study: The proposed study covers five years of financial statement the period of 2006-07 to 2011-12. Limitations of the study: The assess financial statements of MANMUL study based on the secondary data, the study must be limited to the accuracy of the given information. Chapter Scheme: 1. Introduction. 2. Research design. 3. Company profile. 4. Financial performance analysis of MANMUL. 5. Conclusion.

Financial Statement and Ratio Analysis: Key Tools to Successful Financial Management

2633 words - 11 pages Financial Statement and Ratio Analysis: Key Tools to Successful Financial Management Executive SummaryHow do firms assess their own strengths and weaknesses? How does a firm measure management's performance? Finally, how do firms compare themselves against the competition? The answer to these questions lies in the fundamentals of financial management. A crucial element in the success of any business organization is understanding the fundamentals

Financial Ratio Analysis on Philip Morris

2573 words - 10 pages result in court challenges. Instead, some Hill lawmakers have discussed capping annual payments the industry would make. They imagine the industry would settle for 25 to 30 percent of annual earnings.3 Year Ratio Comparison SheetProfitability Ratios 12/31/2004 12/31/2003 12/31/2002Return on Equity (%) 30.67 36.7 57Return on Assets (%) 9.27 9.57 12.68Return on Investment 69.36 66.02 83.06Gross Margin 0.033 0.035 0.037EBITDA of Revenue (%) 18.73

Financial Analysis on Colgate

2368 words - 9 pages help the reader understand how these tools should be used to analyze the financial position of a firm. To demonstrate the process of financial analysis, Colgate Palmolive (India) Limited Balance Sheets and Income statements for the past five years are analyzed in this project.Introduction:Title of the Project: Financial Ratio Analysis of Colgate Palmolive (India) Limited.Objective of the Project:To compare financial ratios from the last five years

Similar Essays

Financial Ratio Analysis

1451 words - 6 pages Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This

Chum Limited Financial Analysis

1816 words - 7 pages and international television, radio, and new media platforms.Thorough analysis of the company places Chum Ltd in a very reasonable financial position clearly showing fiscal 2005's successful operating performance as well as excellent prospects for continued growth in the future. Record level revenues of $628 million and net earnings of 41 million were achieved due to strong performance in both television and radio - both with an increase of 12

Financial Case Analysis Ratio Analysis

652 words - 3 pages The financial ratios used in this problem show that Bethesda Mining has some work ahead of them. There is substantial room for improvement for some of the ratios involved. A more thorough analysis would require ratio information from the mining industry as a whole but a small snapshot is provided below.The current ratio is low. Bethesda Mining's current ratios over the two years given indicate negative net working capital. Insufficient cash to

Ratio Analysis On Imperial Oil Limited

2361 words - 9 pages Imperial Oil Limited operates in the industry of Integrated Oil and Gas. The company refines and sells petroleum products under the Esso brand name. Its main business segments include: natural resources, petroleum products and chemicals. Presently, it is listed on TSX and AMEX market with the symbol "IMO".By looking at the company's 2005 audited financial statements, we will mainly conduct ratio analysis relating to market value, profitability and