Financial management Essay Example | Topics and Well Written Essays - 1250 words - 1

Financial management - Essay Example This presents that fact that the company has been able to maintain its cost of sales and made sure that it remains in constant proportion with the revenue. The company has been able to manage the impact of inflation in the cost of material and labor. The operating profit margin follows the same trend. Net profit margin, on the other hand analyzes the profitability of the company before deducting the taxation and finance charges from the earnings. The ratio is calculated by dividing the profit after interest and tax with the sales revenue of the current financial period. The ratio highlights how well the company is managing its selling and administrative expenses it also highlights the other income generated by the company during the course of its operations. The net profit increased significantly in the financial year 2012 as compared to the financial year 2011. ... ital employed (ROCE) is, according to the analyst, is considered to be the most significant ratio in order to evaluate a company’s performance from an investor’s point of view. ROCE measures a company’s ability to earn a return on all of the capital that is being employed by the company. The ratio is calculated as net income upon total capital employed, which is the sum of debt and equity financings. The return on capital employed is showing a fluctuating pattern as presented in the tabular representation. If we evaluate the tabular information, the ROCE increased sharply from the financial year 2010 to financial year 2011. The net profit of the company increased by a staggering ? 100 thousand during the financial year 2012 which resulted in an incline in the return on capital employed. Earnings per share (EPS) are considered one of the most important financial ratios from the investor’s point of view. The ratio highlights the average earnings from the sha res transacted and is calculated by dividing the profit attributable to the common share holders and multiplying them with the weighted average number of shares outstanding during the period. The earnings per share trend follow the same pattern as that of the net profit margin. The liquidity ratio measures the company’s ability to pay its short term liabilities. The ratio illustrates that how quickly a company can convert its assets into cash and cash equivalent in order to pay off its short term liabilities. The most commonly used liquidity ratio, the current ratio, which is calculated by comparing the current assets and current liabilities. The strengthened the current ratio the more ability the company has to pay its debts and short term obligations over the next 12 months. As apparent from the above