Analysis of Accounts Case Study Example | Topics and Well Written Essays - 2000 words

Analysis of Accounts - Case Study Example This report presents an analysis of Margate plc’s financial performance in the past five years while comparing it with industry peer, Herne Bay Ltd. In addition to this, the report also presents an analysis of cash flows of the company during the past 2 years and at the same time states how financial ratio analysis may not be effective enough for presenting an accurate and useful financial analysis for analysts and investors. At the end of the report, conclusion and recommendations are presented for High Deen plc as far as investment in Margate plc is concerned. Financial Ratio Analysis Based on the information provided in relation to the financial performance of Margate plc in 2012 and 2011, following is an analysis of it performance through selected financial ratios. The financial ratios presented below also take into consideration the ratios determined for the company for the financial years 2010, 2009 and 2008. In addition to this, for conducting a comparative analysis of the company with its competitor, ratios for Herne Bay Ltd have also been determined for the years 2012 and 2011. Return on Capital Employed The return on capital employed for Margate plc increased in 2011 due to significant increase in the revenues but then in 2012 with a decline in revenue, the ratio declined. On the other hand, one other reason for this decline is increase in the total capital employed by the company, which ultimately reduced this ratio. However, while comparing Margate plc’s return on capital employed with the Herne Bay Ltd’s ROCE, it can be observed that the company has almost maintained its position in relation to its competitor (Peterson & Fabozzi, 2012; Jiambalvo, 2010; Helfert, 2001). Ratio Margate plc Herne Bay Ltd