For the assignment this week, you are provided with two sets of financial statements and then asked to undertake financial analysis on the data. You are also required to calculate earnings per share, both basic and diluted. Finally, you should interpret the measures that you have calculated and provide comments regarding the financial performance of the organisation.
You will find an income statement, statement of financial position, and notes to the financial statements for a fictional company attached below. Each statement shows figures for the past 3 years. After reviewing the financial statements, complete the questions below.
Required:
- Complete a ratio analysis on the attached financial statementsfor each year provided. Compute the following ratios: operating return on equity, financial leverage multiplier, return on capital employed, asset turnover, net profit margin, current ratio, and gearing ratio.
- Compute both the basic and diluted earnings per sharefor each year provided.
- Include the above calculations in a business report, providing a detailed analysis of profitability, liquidity, solvency, and asset utilisation of the organisation from the information that you have calculated. What details can you glean from this analysis? What trends do you see? What additional information may be needed to provide a clearer picture?