Question

Analyze the performance of the following firm:

Blank	This Year	Last Year
Assets	500	478
Liabilities	100	100
Sales	480	478
EBIT	140	149
Interest	10	10
Taxes	65	70
Net Income	65	69

(This year’s ratios: ROE .163, GROA .28, FE .581, GPM .292, ATO .96, EM 1.25, IR .929, TR .5)

Answer 1

The asset base in the current year has increased as compared to last year, liabilities being the same. This is a positive indicator of the performance of the company. The sales have marginally increased but EBIT has reduced. This shows that the profit margin of the company has reduced. This might be due to increase in operating costs incurred. The operating performance has been negative. Due to dercease in EBIT tax expense has reduced and so has the net incoem.

Overall with the increased asset base, the company has been able to generate lower profits as compared to lats year. Thus, the performance of the company in the current year has been negative as compared to last year.