Financial management and control

3622 words 15 pages
TABLE OF CONTENT
1. Part A: Solvent Plc
Table 1: Summary of Differences in two years of Financial Ratios 2
Calculation of Working Capital Cycle (days) 2
Performance Analysis 3-4

2. Part B: Mega Plc
Question 1 5
Question 2 6
Question 3 7
Question 4 7

3. Part C: Brothers Ltd
Question 1
a) Payback Period Calculations 8
b) Accounting Rate of Return (ARR) 8
c) The Net present Value 8
d) The Internal Rate of Return (IRR) 9
Question 2 9
4. Part D
Question A 10 – 11
Question B 11 – 12

5. Reference
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It shows that the current ratio in 2011 is 1.8:1; while in 2010 is 1.7:1, an increase of current ratio indicate the company has higher liquidity In business to meet with the short-term finance obligation. Another ratio to determine the liquidity of the company is the acid test ratio; it compares how quickly an asset that can be liquidate to current liability, it is a measurement of the company ability to pay his finance obligations. The level of acid test ratio has increase from 1.2 to 1.5 in year 2011; from the acceptable level of acid test ratio, a level of 1.5 is consider a good sign for investor as this indicate the company has lesser risk.

Gearing

The gearing ratio has reduce 3% from 43% to 40%, this also effect the debt to equity ratio which has been decreasing from 77% to 65% which is worrisome to the investor, since the gearing ratio has reduce. A decrease in both of this ratio may due to continuous borrowing from lenders. The interest cover has reduce more than half times, which is worry some to the investor as the lender may take action against the business to recover the interest due which may lead to company’s bankruptcy.

Investor Ratios

In terms of the performance of the share, the Earning per Share (EPS) has

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