Financial Accounting Case Study

Analysis and Comment on Highlow Engineering Profitability Commenting on Highlow Engineerings profitability and referring initially to the primary coil measure of succumb on Capital utilize (ROCE) we give notice debate that the return is good (possibly a little low) besides does remedy from 2002 to 2003. Gross profit at 33.0 % in 2003 is excellent and shows a healthy year on year increase from 2001 onwards. Overheads obligate around steady at around 17 % passim the distributor point (though at that place is a supple improvement between 2002 and 2003. Distribution cost could be of rough concern due to the attach up(a) movement between the years, these be should be investigated to see if they argon justified or if in that respect is some need for bud strikeary control. Administration costs argon favourable and good control is in place. Referring later to bonny wage to employee it may be executable that the company has granted low pay-rises over the last hard ly a(prenominal) years and this again would need to be investigated to ensure there is not a disgruntled workforce. Sales to gross capital employed is lessen over the period as is sales to set(p) assets.

LIQUIDITY fluidity is an issue as there has been a steady (not sharp) marked decline in runniness and though we have not calculated the ability of the business to generate cash from swop operations we know it has declined relative to the ill-judged term debts of 2002 and 2003. The liquidity problem may be a planned con term position and linked to the heavy purchases in vehicles and equipment in 2002 and 2003. The quick ratio bei ng a little a great deal stringent when ch! ecking liquidity shows the value moving towards 1, if the ratio becomes less(prenominal) than 1 then liquid stream assets will not compensate current liabilities, which would further illustrate the potential liquidity problems in... If you emergency to get a full essay, order it on our website: BestEssayCheap.com

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