Report to director board on finantial position and performance of ABC PLC.

Dear Sir / Madam ,

I would like to write this report based on comparison of finantial positon and financial
performance of ABC PLC in 2018 and 2019. Based on two year comparison mentioned below ,
we noticed imporovement of finanial position and favourable finantial performance in most
areas but also notice certain area which indicate a decrase in terms of performace.

2018

Current ratio 2.26

Acid test ratio 0.91
 Gross profit ratio 27.66%
Net profit ratio 4.92%
ROE 2.98%
ROA 2.02%

Stock turnover ratio 2.01 times

Stock residency period 181 days
Ave debtors collection period 41days
Ave creditors settlement period 68 days

Debt to assets ratio 21.41%

Debt to equity ratio 31.62%

Current ratio measurers company’s ability to meet its shot term debts, means how quickly it can
convert current assets when short term liabilities due. Here current ratio indicates company’s
liquidity a higher value is always favorable as company able to successfully settle its short term
obligations without loss.
The current ratio for ABC PLC for 2019 is 3.96 which compared to previous year figure of 2.36
indicates the increase of company’s ability to meet short-term obligations successfully
Acid test ratio or quick test ratio compares a company's liquid assets with short-term liabilities to
see the company has the ability to pay its immediate liabilities debtors. The acid-test ratio not
count current assets which cannot liquidate quickly such as stock in hand. A ratio of 1:1
preferred. By looking at ratio of 2.09 in year 2019, strong liquidity position of ABC PLC can be
noticed than previous year.[ CITATION Oma16 \l 2057 ]

Gross profit margin is the difference between the revenue generated over the cost of goods sold
this shows the performance of a company's sales and
Net profit margin is the percentage of revenue remaining, after all, operating expenses
Both these ratios expressed the financial health of the company. When looking at both net profit
ratio and gross profit ratio improvement of both can be noticed and this shows the success of
profitability.
Return on equity (ROE) is an indicator of the profitability of a business comparing to equity.
ROE measures how many rupees as profit can be generated for each rupee invested by
shareholders as equity. Means ROE reflects how well the business can use the money invested
by shareholders  

The return on assets (ROA) indicates the profitability of the business about how its assets
generating revenue. It simply says how many rupees can business generates from each repress in
owns as assets.  
Looking at ROE and ROA of ABC PLC, the improvement of both profitability ration indicates
the success of the company in generating profits with equity and assets.[ CITATION Wha \l 2057 ]

By looking at stock turnover ratio and stock recidency period , it showa how well the business
able to manage stock during a specific period lower figure of low inventory turnover ratio and
higher stock residency period comparing to previous year says slight ineffectiveness in stock
management and management must take necessary action to reduce high storage cost.