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Erma Financial Ratios

1071 Words5 Pages

The Business Report analysis both The Pacific Energy Limited and ERM Power Limited. It explores their Profitability,liquidity,Asset and Capital Structure Ratios. Furthermore it discusses and recommends investment, and the CSR of the companies it also provides financial statements with horizontal, a vertical and financial ratios. Both ERM Power Limited and Pacific Energy Limited are generating healthy and unhealthy returns, with Pacific Energy Limited generating a healthier return. ERM Power Limited has a Return on equity ratio of 9. Be that as it may, in contrast with its earlier year the arrival on value has dropped by twofold. Therefore, it has a negative effect as the company is generating less profit with the shareholders equity. organisations, …show more content…

Additionally, 11.8cents of solid return for every dollar contributed by investors. Contrasting it with its earlier years return of value of 8.9, its ratio has almost gone up by 3.00. Pacific Energy is enhancing and makes it more engaging for new capital investments. Furthermore ERM Power Limited has a return on assets ratio of 12.8 which is classified as good in its industry. Its ability to generate earnings from is its assets is strong. Moreover, The Pacific Energy has a return on assets of 8.32 which is adequate. Meaning that is has an average return on Assets. ERM Power Limited has a profit margin ratio of 5.2, the earning of profit from the sales of revenue for the entity is low. While the, Pacific Energy has a profit margin of ratio of 30.27 which means that the entity earns a gross profit of 30.27cents per dollar from sales revenue, which is considered healthy. However, ERM Power Limited has a cash flow to sales ratio of 4.5 which is not healthy as it is not generating enough cashflow. Many risks associated with this as a negative cashflow causes many businesses to fail. The Pacific Energy has a cashflow to sales ratio of 60.2, generating a healthy cashflow generated by its revenue. Because cash flow helps the business run and helps keep up with the entities

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