This report has been commissioned to provide an independent assessment of E. Coaldrake's business for prospective purchasers of this going concern. The report intends to present an overview of the past performance of E.Coaldrake's business over the previous accounting period and to assess the financial position of this business. While the scope of this report is mainly the financial results of the 2015/2016 year, some results from the previous four years have been used to gauge the trends occurring in the business. Where appropriate, results have been benchmarked against industries standard to give a better assessment of the performance and standing of the business within the industry.
ore are investigated. .
Analysis and Interpretation.
Profitability.
Gross Profit.
(significance of ratio) This ratio indicates the ability of the business to generate profit from sales.
(explanation of the ratio) It is an indicator of the businesses financial health and shows how efficient the business has been in selling its inventories.
(analysis of the ratio in relation to benchmarks and industry averages) E.Coaldrake's gross profit ratio of 49.2% has met the businesses internal benchmark of 30% and is above the industry average of 47%.
(interpretation of the ratio) This results indicates that the business has set its selling prices at a level, which will cover the cost of goods sold with money left over for other operating expenses. Although analysis of the cost of goods sold indicates that it takes in 2016 50.79% of revenue earned from sales indicating that the business may have too much inventory on hand or may be holding poorly selling items.
(evaluation of the ratio) This ratio places the business in a position to make an acceptable return on net profit and rate of return on equity.
Net Profit .
(significance of ratio) The net profit ratio indicates the ability of the business to generate profit from sales revenue.