exercise

1. ProfitabilityRatios 2013 2014 Interpretation
Returnon Equity 18.5% 7155
30200 + 35600
2
× 100%
= 21.7%
Duringthe 2013-2014 period.
the business'ROEincreased
from18.5% to 21.7%. this
meansthe ownerisgetting
more returnfrom hiscapital
Netprofitmargin 6.7% 7155
72970
× 100%
= 9.8%
Duringthe 2013- 14 periodthe
business'NPMhasincreased
from6.7% to 9.8%. thismeans
the businessisgettingbetterat
controllingitsexpenses.
Gross Profitmargin 34% 23360
72970
× 100%
=32%
Duringthe 2013-14 periodthe
business'GPMhas decreased
from34% to 32%. thismeans
that the businessisgetting
worse at controllingitsCOGS
expenses.
SellingExp.Ratio 16.5 9920
72970
× 100%
= 13.5%
Duringthe 2013-14 periodthe
business'SERhas decreased
from16.5% to 13.5%. this
meansthat the businessis
gettingbetteratcontrollingits
SER expenses.
General Exp.Ratio 8.8% 4535
72970
×100%
=6.2%
Duringthe 2013-14 periodthe
business'GERhas decreased
from8.8% to 6.2% . thismeans
that the businessisgetting
betterat controllingitsGER
expenses
Financial Exp.Ratio 2% 1750
72970
× 100%
=2.4%
Duringthe 2013-14 periodthe
business'FERhas increased
from2% to 2.4% . thismeans
that the businessisgetting
worse at controllingitsFER
expenses.

2. StabilityRatios 2013 2014 interpretation
Workingcapital 1.03:1 8875
10420
= 0.85: 1
Duringthe 2013-14 periodthe
business'WCfrom1.03:1 to
0.85:1. thismeansthat the
businessabilitytopaditscurrent
liabilityisgettingworse. in
additionitdoesnotsatisfythe
minimumrequirementto2:1
total debt 80.2% 58420
94020
=62.1%
Duringthe 2013-14 periodthe
business'TDRhas decreasedfrom
80.2% to 62.1%. thismeansthat
the businesstotal debthas
decrease.inadditionthe business
still exceedsthe maximumlimitof
50%
stock turnover 29.2days
365 ÷
49610
3755 + 3440
2
=26.5days
Duringthe 2013-14 periodthe
business'STRhas decreasedfrom
29.2days to 26.5 days.thismeans
that the businessisgettingfaster
at sellingtheirgood
debtorturnover 24.8
days
365 ÷
36485
5490 + 4760
2
51.3days
Duringthe 2013-14 periodthe
business'DTRincreasedfrom
24.8days to 51.3 days.thismeans
that the businessisgettingslower
at collectingitsdebt
interestcoverage 2.5 times 1750 + 7155
1750
= 5.1
Duringthe 2013-14 periodthe
business'ICRincreasedfrom2.5
timesto5.1 times.thismeansthat
the businessabilitytopayits
interesthasbecome better.in
additionitsatisfythe minimum
requirementof 5 times