Financial Ratio Analysis of Metalrax Plc.

Subject  > Businesss Research Papers  > Accounting

1.IntroductionWhat is the proper standard to assess a company’s performance and financial position? Lots of answers could be given because of different measures. For example, reading an annual report, readers may find that the word “profit” has several meanings. “Measures of profitability,” Philip O’Regan (2005) states in his book, “will be important for a variety of users”. Since different user has different method to judge a company’s “profitability”, shareholder would choose return on shareholders’ funds to make a decision whether invest a company or not; meanwhile, a bank would consider a company’s return on capital employed before lending money. With significant accounting ratios, this paper assesses the profitability, liquidity, management of working capital and the capital structure of Metalrax Group ...

... 73.8% from 10 million at the end of 2004 to 2.7 million at the end of 2005. It seems that the company intend to increase its production capacity in last two years in order to boost market share, despite its increasing debtors settlement period, decreasing trade creditors period and extreme reduction of cash. Overtrading would a big problem for Metalrax if it loses control of financing capital. To strengthen credit and debt management and increase cash flow is one of choices to avoid overtrading. In that case, Metalrax may negotiate payment terms with customers and suppliers, sell any fixed assets that do not generate profits, or introduce new capitals. And it should always bear in

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