Financial Ratio and the Gross Profit Assignment Example | Topics and Well Written Essays - 500 words

Financial Ratio and the Gross Profit - Assignment Example The ROCE is has decreased over the four years from 15.78% in 2010 to 11.63% in 2013; indicating that the company received fewer earnings for every unit of capital invested in the company in the recent years compared to the past years. However, it is above average in the industry in terms of utilization of assets to earn profits because its ROCE is more than the industry average of 8%. Generally, the company is doing well in terms of profitability. Inventory days decreased from 2011 to 2013, indicating that the number of days that inventory remains in the store has decreased; hence the company is managing its inventory successfully. Compared to the industry, the company is below average in the number of inventory days because the average industry average is 60 days. This shows that the company manages its inventory more effectively than most companies in the industry. Receivable days are also lower than the industry average indicating that the company collects its debts faster than most companies in the industry. Payable days are also lower than the industry average, showing that the company pays its credit faster than most companies in the industry. Debt/equity ratio decreased from 0.96 to 0.82 in 2013 indicating that the equity could pay total liabilities more times in 2012 than 2013 using its equity. This is a lower number of times compared to industry average, meaning that the company’s equity can pay off its liabilities faster than most companies in the industry (Sutton, 2004). The interest cover of decreased over the four years from 11.16 times in 2010 to 5.70 times in 2013; indicating that the company uses fewer debts to fund its total assets in the recent years. it is also below the industry average of 12 times; hence it uses less debt to fund its assets than most companies in  the industry.