Commentary on Accounting Ratios Research Paper Example | Topics and Well Written Essays - 1000 words

Commentary on accountancy Ratios - Research Paper ExampleThis means newer businesses will generally arrive at lower ROCE as compared to aged(a) businesses due to the depreciated amount of its assets. Additionally, the number of years that both Dairy Crest and its close competitor have been in business is unclear. The revenue of Dairy Crest is up by nearly 20% in 2008, resulting in Operating Profit Margin of 6%. This result is on par with its competitor. However, the improvement whitethorn have been attributed by the twofold increase in Dairy Crests other income, of which the breakdown has not been disclosed. precondition the equal result, it can be said that the competitor may be new in the grocery since its ROCE is way lower than that of Dairy Crest.In fact, the companys Gross Margin Profit is down from 4.6% in 2007 to only when 3.9% in 2008, whereas its competitors is 25.7%. Looking at Dairy Crests consolidated income statement, its operating cost is up by almost 21% char m its revenue increased only by about 20%. Also, there may be some differences in the pricing strategy adopted by the two companies, which explains the big time out in the margin.The companys Asset Turnover Ratio is slightly better at 1.8 times in 2008, while its competitor is at 1.9 times. The higher revenue in 2008 means Dairy Crest is utilising its assets more. Assuming its competitor is new in the business, this result shows Dairy Crest is not performing as well as its competitor.It appears that Dairy Crest has better control of its stocks with a drop in its Stock Turnover of 38.6 long time in 2008 against 43.1 days in 2007. As food stocks are perishable items, it is advisable not to comprise them for too long. Dairy Crests move to bring its stock holding period down by 10% is wise. While its competitor holds stocks 46 days in 2008, it is unclear if this is due to uncertainty in suppliers, as the high levels seem unnecessary based on industry. The Current Ratio of Dairy Crest in 2008 is 1.4, an improvement from 1.0 in 2007. This shows the companys financial position is healthier. However, its competitors Current Ratio of 0.8 in 2008 seems risky, as