Requirements:
prepare a repod of no more than 1,250 words for the board addressing the following
issues:
i. For each of the following financial ratios,
a. Explain what element of financial performance each of them describes
b. Calculate the ratio for each year for this company
c. Applv the result to consider why the ratios might have changed using the
information in the scenario
i. Sales Growth
ii. Gross Profit Margin
iii. Operating Profit Margin
iv. Gearing
v. lnterest Cover
vi. LiquiditY Ratio
vii. Return on EquitY
viii. Return on CaPital EmPloYed
You should not consider any ratios other than these
(5 marks each, total 40)
ii. Analvse and recommend how the board might assess the financial
pefformance of the business (10 marks)
ASSESSMENT CRITERIA
This assignment requires you to demonstrate your knowledge and understanding of
a) the management of cash and b) financial ratio analysis.
Your discussion for part 1 of the assignment should explain the difference between
cashflow and profit. Your answer must identify and explain why the accounts of a
business can report a profit but a shortage of cash, and discuss the consequences to
a business of being short of cash. The general causes of cash flow problems should
be analysed using the case study presented to you, particularly regarding the
management of working capital. Methods for dealing with cash flow problems and
managing cash for the business described should be proposed and evaluated.
Your answer for part.2 of the assignment should identify and explain the meaning of
each financial ratio specified and what such a ratio tells you about the company. You
then need to calculate the ratios accurately, showing your calculations clearly. Finally,
you should analyse what the business is doing which is causing the ratios to be as
they are and make recommendations accordingly. For the purposes of this
assignment (and because there are some industry variations in how ratios are
calculated) you should use the ratios formula attached to this assignment brief.
Sample Solution