Im not sure about this figure, with th0d Returned on capital employed Net profit (after appropriations) X 100 = 44160 = 29. 61% Capital employed 149160 This figure shows you how much money will be returned back into the business depending on how much they have invested. Not investing money into the business means you will not be making profit. I am not sure if 29. 61% is a good figure but it must be a good figure if the capital employed is ? 149,160. Maybe if the percentage is higher they employ more capital and they can re-invest more. Liquidity ratios-Current ratio
Current assets: 1 = 70160 = 4. 53:1 Current liabilities 15500 Every ? 1 that they owe they own ? 4. 53 worth of assets. For SIGNature ltd the ratio is good, meaning not too much stock or owing too much to debtors. Acid test ratio Current assets – assets: 1 = 70160 – 1200 = 4. 4:1 Current liabilities 15500 Every ? 1 they owe to suppliers or banks they will have ? 4. 41 of current assets. This means they have enough money to pay for costs like heating, lighting, telephone, courier charges and insurance. Average stock Kept over the year X 365 = 6000 = 9. 3 days Cost of goods sold 521700 Efficiency Ratios-Rate of stock turnover Every 9 to8 days they make a sale; this figure is not good because when running a business like SIGNature ltd you would like to be making sales more often. Debtors X 365 = 41000 = 28. 69 days Credit sales 521700 Debtor’s payment period A debtor’s payment is just about monthly meaning credit customers pay them every 28. 69 days, SIGNature should monitor their debtors and check how much they buy, when they pay back the full amount and which debtors are not paying in the 30 day period.
Creditors X 365 = 15500 = 24. 11 days Credit purchases 234675 Creditor’s payment period 24 days is how long SIGNature takes to pay for credit purchases and they do pay their credit in good time. If you don’t to your credit suppliers respond you may be charged additional interest, penalties and surcharges. Your debt may be referred to a private debt collection agency. Conclusion In this task I have performed ratio analysis and measured the profitability and efficiency of SIGNature and analysed the performance of a business using suitable ratios.