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Financial Ratio Analysis Paper

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Making sense of financial statements can be a difficult task for the average investor, however, with quantitative analysis of the information, many financial ratios can assist in analylising the company to determine its strengths and weaknesses to understand how the business is performing and where improvement is warranted. The ratios don't take into account the size of the business or the specific sector or industry involved, so comparions with any other company can be made. The table above lists a selection of these financial ratios over a 5 year period, and each of these listed ratios will be interpreted.

Return on Average Assets
The return on assets ratio (ROA) measures how efficiently the company is using its assets to provide its shareholders …show more content…

This is totally understandable as the company had just had two years of massive operating losses and had to refinance the business by embarking on a share rights offer to save the company from liquidation. In 2010 the ROA improved to +1.59%. The reasons for the improvement was that the new board of directors started restructuring the operations and began closing many of the divisions making losses. In 2011 the ROA was still low at +5.29% but still a substantial improvement as the restructuring program continued and begun to influence the profits. This improving trend was sustained in 2012 with an ROA of +7.92% achieved. However, in 2013 the ROA decreased to +3.24%.This followed a further company restructure when the controlling shareholder of Seardel, HCI moved their shareholding of a media company known as Sabido into the Seardel company, plus the costs of the restructure and retrenchments were felt during this financial year.Operations in the garment sector were closed and these vacant factories were renovated and refurbished into letable units at great …show more content…

This ratio decreases slowly but consistently for the next 4 years to 1.49 in 2010, 1.47 in 2011, 1.38 in 2012 and 1.17 in 2013. This fairly steady deterioration in the current ratio over the past 5 years can be attributibale to the company using most of it's available income to fund the turnaround and restructure of the business operations.

Quick Ratio
The quick ratio is also known as the acid test ratio, and is a refinement of the current ratio in that only current assets that can be quickly (say 90 days) converted into cash is used rather than the total current assets. Accordingly a higher ratio could indicate a more liquid position for the company.
As expected the quick ratio for Seardel is consistently low for this 5 year period, with ratios of 0.84, 0.89, 0.75, 0.76 and 0.53 from 2009 to 2013. As with the current ratio short term cash flow and liquidity would naturally have been under pressure as the company was using most of it's available income to fund the turnaround and restructure of the business operations

Total Assets Turnover Ratio
For a company like Seardel that is heavily invested in plant, equipment and property this is an important measure as it indicates how effectively a company is using its assets to increase sales. A higher total asset turnover ratio indicates

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