Compass financial analysis and sources of finance used by the company Essay

dig up financial analysis and sources of finance apply by the company - Essay ExampleGross Profit proportionality It is calculated by the pursuit formula. Gross net profit dimension = (Gross profit / dinero sales) ? 100 The results are presented in Table 1. Table 1 Gross profit ratio of the Compass multitude Plc Company ? million 2011 2010 Gross Profit 1,010 983 meshwork Sales 15,833 14,468 Gross profit ratio 6.38% 6.79% There is a decrease in the gross profit ratio that has been realized amounting from 6.79% in 2010 to 6.38% in 2011. This can be attributed to poor sales strategies and an increase in the cost of goods sold (Compass Group Plc 2011, p.63). Mark Up It is calculated as shown below. Mark up = (Sale bell / Cost) 1 The results are shown in Table 2. Table 2 Mark up of Compass Group Plc ? million 2011 2010 Sales price 15,833 14,468 Cost 14,823 13,485 Mark up 6.81% 7.29% The mark-up decreased slightly from 7.29% in 2010 to 6.81% in 2011 (Compass Group Plc 2011, p.63 ). This can be contributed to low sales turnover, coupled with an increase in the costs of sales. Net Profit proportion It is calculated by means of the following formula Net Profit Ratio = (Net profit / Net sales) ? 100. The results are shown in Table 3. ... 2011 2010 EBIT 958 913 Total Assets up-to-date liabilities 9,410 (3,990) 8,254 (3,239) Net profit ratio 17.68% 18.21% A significant decrease in ROCE was realised, when it reduced from 18.21% in 2010 to 17.68% in 2011 (Compass Group Plc 2011, p.67). However, it is necessary to bank bill that the rate of capital employed should always be higher than the companys rate of borrowing, other than proportionate increase in borrowings would result into proportionate reductions in earnings of companys shareholders. Current Ratio This is a ratio between current assets and current liabilities, where current means the assets and liabilities that need to be paid within one year. This ratio shows how well the assets can repay the amount of liabilities of the company, and it also assesses the fluidness of the companys assets (see Table 5). In the Compass Group Plcs case, the current ratio appears reduce than it should be. Even though there are not even enough assets to pay the liabilities, the company is doing moderately well (Dobbs, Huyett & Koller 2009, p.54). Table 5 Calculations of the current ratio ? million 2011 2010 Current Assets 3,475 2,752 Current Liabilities 3,990 3,239 Current Ratio 0.87 1 0.85 1 Acid Test (Quick) Ratio There is the following formula used for the calculation of this ratio acid analyse (quick) ratio = (current assets inventories)/current liabilities (see Table 6). Table 6 Acid test ratio of the company ? million 2011 2010 Current Assets Inventories 3,475 270 2,752 238 Current Liabilities 3,990 3,239 Quick Ratio 0.803 1 0.776 1 Compass Group Plc quick ratio was 0.8031 and 0.7761 in 2011 and 2010 respectively. Given that the quick ratio of 11 is considered as a satisfactory financial condition, Compass Group Plc is sufficiently liquid