Abdul Wahab Investment

Ratio Analysis
Contents
Introduction ................................................................................................................................................................ 2
Ratio Analysis of Seseka Analysis ............................................................................................................................ 3
Profitability Ratios ..................................................................................................................................................... 3
Gross Profit Margin ............................................................................................................................................... 3
Net Profit Margin ................................................................................................................................................... 3
Return on Shareholder fund ................................................................................................................................... 3
Liquidity Ratios.......................................................................................................................................................... 3
Current Ratio .......................................................................................................................................................... 3
Quick Ratio ............................................................................................................................................................ 3
Turnover Ratio ........................................................................................................................................................... 1
Inventory Turnover Ratio: ..................................................................................................................................... 1
Accounts Receivable Collection Period ................................................................................................................. 1
Account Payable Settlement Period ....................................................................................................................... 1
Financial Ratio ........................................................................................................................................................... 1
Dividend Ratio ........................................................................................................................................................... 1
Earnings per Share ................................................................................................................................................. 1
Price Earnings Ratio............................................................................................................................................... 1
Dividend Yield and Cover Ratio ................................................................................................................................ 1
Completeness of the information and its implications ............................................................................................... 1
Areas need further investigation ................................................................................................................................ 2
Interpretation and limitation of analysis .................................................................................................................... 2
Recommendation ....................................................................................................................................................... 2
About Company
The Chief Executive Officer of Abdul Wahab Investments is considering the financial information of
Seseka Analysis, for the yr finishing 31 July 2019. They are considering acquiring the agency stocks
and trying to determine whether or not to bid for manipulate or to take a smaller stake inside the
business.

The financial performance of the Seseka Analysis is as follows;

Ratio Analysis of Seseka Analysis
The analysis of financial reports is the calculation and assessment of the reports acquired from the
statistics contained within the company's financial statements to show ancient tendencies about the
company's monetary position, its operations and its beauty as an investment.
Profitability ratios
Gross profit margin
Presents the operational efficiency of the business. It measures production efficiency as well as prices.
An increase in percentage refers to an increase in the selling price or a decrease in the cost of
production. Seseka Analysis has improved the company's performance, with gross margin reaching 46%
in 2019 and 39% in 2018. Provided that the company improves its gross profit on sales. It also shows
that the company reduces its cost or increases its sales result in the increase of GPM.
Net Profit margin
It presents the general efficiency of the business. The high ratio indicates greater business efficiency and
better use of total resources, and Seseka Analysis improves the net profit margin ratio from 25% to
29%. This increase in percentage has led to an improvement in business efficiency.
Profitability of the shareholders' fund
It measures the productivity of shareholders' funds. The high ratio indicates a better use of shareholders'
funds or an increased productivity of the owner's money. Seseka Analysis's shareholder performance is
increasing compared to last year, which indicates that the management is very efficient and has used the
company's resources in a very efficient way. This leads to an increase in the percentage of shareholder
funds from 23% to 25%.
Liquidity Ratio
Current Ratio
Current Ratio is useful for knowing the company's solvency. The current high ratio indicates that
company will pay its liability of short term will pay in one year time. The standard minimum current
ratio is 2: 1. Seseka Analysis has a current ratio of 2.6 compared to the previous year 2.4. The
company has a total current ratio greater than 1.
Acid Test Ratio
The rapid ratio is also known as the acid test ratio. It indicates the company's immediate ability to pay
its current obligations. The standard fast ratio should be 1: 1. Seseka transactions analysis a fast ratio of
1.25 in 2019, while it was only 1: 1 in 2018. The fast ratio compared to the industry average should be
higher than 1: 1.
Turnover ratio
Inventory Turnover Ratio
Refers to the wide variety of stock instances replaced in a given period, generally one year. The better
the ratio, the greater green the inventory management. Seseka transactions boost up the evaluation cycle
and shorten inventory turnover, lowering sixty five to 50 days in comparison to preceding years.
Provided the agency manages stocks efficiently.

Debt collection period

It refers to credit and collection policy and also suggests competence in managing debtors. The common
collection duration must no longer exceed 1.5 times the permitted credit score length. The accumulation
period inside the Seseka Analysis is also shorter than 50 to 35 days in 2019, which indicates that the
enterprise has an awesome price department, with progressed and better rules to reduce the collection
duration.
Payable settlement period
It indicates how creditors have a credit period, as Seseka transactions perform excellently, as they have
a longer payment period and a shorter payment period.
Financial Ratio
Capital gearing ratio
This analysis shows the relationship between preferential capital and bonds. Seseka transactions
progressed the debt ratio from 60% to 57%. This manner that the organization reduced its debt capital
and repaid its debt, which led to a reduction in the share of capital debt.

Dividend.ratio
Earning Per Share
This report over a period of time suggests a alternate in assets for every shareholder. The other percent
increases the opportunity of increasing dividends and increasing the market fee of stocks. Seseka
transactions stepped forward their profits according to share via 0.50 from 0.38. This method that both
the business enterprise has a decrease in shareholders or an increase in profits in comparison to last year.
Price Earning Ratio
It refers to the connection between the inventory market fee and the present day profits consistent with
share. Helps decide the future ratio of the inventory. Seseka transactions also progressed their ratio-to-
income ratio through 12 as compared to remaining year, that's 10.

Dividend yield and cover ratio

Indicates the modern-day go back that investors will receive as a percent of the investment. It refers to a
feature such as the profitability and income coverage of the enterprise. When the dividend is decrease
than the predicted go back, the market fee of the share may also fall in the destiny or vice versa. The
agency has a dividend yield of 7.10% to 5.90%, at the same time as dividend coverage has been stepped
forward from 2.55 to 2.45.

Completeness of information and its implications

The organization's economic statements are prepared in accordance with worldwide economic reporting
requirements and global accounting standards. Accountants prepare economic analysis approximately
accounting arrangements, consisting of completeness of data that has an impact at the financial function
of the company that traders need to know. Therefore, the statistics have to be supplemented according
with the accounting rules. Currently, the Analysis of Ratio Analysis Sessions is achieved and presented,
primarily based at the completeness of the statistics with impact at the reports. Thus, the outcomes of
proportions also are important.

Areas need further investigation

1. The ratio of gross income margin has increased since last 12 months and further study is needed to
ensure better sales or lower fees. In order to get familiar with the region, statistics are wanted on this and
also the analysis will help the enterprise to increase its approach in addition to to lessen taxes through
strengthening the process. On the alternative hand, the organization needs to become aware of markets
where income are enhancing, and the organization is confident to motivate personnel to boost income or
to broaden a method to enhance product pleasant at a lower fee than before to attain the organization's
goals. Therefore, these factors are important for further investigation.

2. As discussed above, the extent of fees must be decided and investigated so that the overall unit cost is
decreased and needless expenditure is controlled. The company need to establish an expenditure policy
and price manipulate measures should be taken. This discount will need to be investigated.
3. The agency has a cutting-edge and cutting-edge take a look at report, which has been stepped forward
over ultimate year. Improving the state of the corporation's running capital needs to be investigated, and
the corporation wishes to increase better techniques for the future in order to assist the enterprise acquire
its goals.
4. The debt ratio additionally decreases from 60% to 57%, which means that the ability has raised the
level of the debt, paid the debt or has already paid the responsibilities similarly or the coverage
premium, which has caused the debt relief. You want to investigate the currency function of the agency
that paid the bond. So that is the primary component to draw interest to, if the enterprise receives rid of
long-time period homes to reduce gears?

Interpretation and limitation of analysis

Interpretation of proportions is a critical factor. When decoding, the restrictions inherent in evaluating
reports need to be taken into consideration. The effect of factors like rate modifications, modifications in
accounting policies, windows, etc.. Calculating proportions will not be a tough task; However, its use
isn't always easy. The following hints or factors can be considered at the equal time that unmarried
percentages are decoded
 Accuracy of the financial information
 Cause or the reason of the change of information
 Choose the proportions

The use of criteria needs to be taken into consideration when trying to offer an evidence of the
proportions.

Recommendation
It is recommended that you bid for the company to acquire Seseka Analysis, as the company performed
better than ultimate year. However, before acquiring the company, the issues to be investigated need to
be examined.
References
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