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Conduct a comprehensive ratio analysis

Assignment Help Financial Accounting
Reference no: EM132263728

Yves is considering an investment in one of the two New Zealand franchising companies. The balance sheets and the income statements of the two companies he is considering could be found in attachment.

You are required to use the financial statement analysis skill and knowledge that you have learnt from MGT200, help Yves to make a wise decision. To make your opinion and explanation more convincing, you have to:

A. Conduct a comprehensive ratio analysis of each company and compare the results. This should include an analysis of: (You have to show the formula you are using and the working of your calculation.)

1. Profitability ratios
1. Return on ordinary shareholders' funds (ROSF)
2. Return on total assets (ROA)
3. Return on capital employed (ROCE)
4. Net profit margin
5. Gross profit margin

2. Efficiency Ratios (Assets utilisation ratios)
1. Average inventory turnover period
2. Average settlement period for trade receivable

3. Non-current asset turnover Total assets turnover
3. Liquidity ratios
1. Current ratio
2. Acid Ratio

4. Solvency ratios (Gearing ratios)
1. Gearing ratio
2. Equity ratio
3. Debts to total assets ratio
4. Interest cover ratio

5. Investment ratios
1. Dividend per share
2. Dividend pay-out ratio
3. Dividend yield ratio
4. Earnings per share
5. Price earnings ratio
6. Net tangible assets backing per share

B. Compare the analysis of each company by inserting the ratio you have calculated from above analysis in a table with the following columns:

Indicate in the last column for the company that apparently has the more favourable ratio in each case.

C. Ratios can be grouped into certain categories (we have five here), each one reflects a particular aspect of financial performance or position. Interpret the implication of each broad category for both companies based on the above calculation.

D. Explain how previous year's financial statement or balance could help in financial analysis.

E. Which franchise business you would suggest Yves to invest and why?

Attachment:- Assessment Question.rar

Verified Expert

The assignment includes a comparison of Franchise A and Franchise B on the basis of various ratios such as profitability ratio, liquidity ratio, solvency ratio etc. Ratios are calculated to determine the performance and profitability of the company. The investment decision is based on the ratios calculated and the conclusion is made regarding the investment decision.

Reference no: EM132263728

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Reviews

inf2263728

9/3/2019 1:53:23 AM

No spelling mistake, original work and good formatting is done in the assignment. I will come again to use your services again. Nice team.

len2263728

3/22/2019 10:30:34 PM

Hey team, Here is another one for management and financial accounting. Its an accounting question. Use management accounting information to assist decision-making in a given business situation This is a compulsory. The assignment is worth 30% of your final grade.

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