Financial Analysis Essay Example | Topics and Well Written Essays - 2500 words

Financial Analysis - Essay Example Over the past five years the Home Retail Group company has had ups and downs trend in terms of its profits but the gap between the profits is very small, for example the difference in profits between 2012 and 2011 is less than 1% this is an indication that the company maintains its standards of high performance over the period. For example the percentage gross profit for 2010 and 2011 is 45.45%, this was seen in both years, an indication of financial health for the company although not at a very good standards, but it shows that the HRG Company is capable of paying for the operational expenses without financial constraints. There is an increase in percentage of profit margin from 0.11%to 0.055% in the year 2011 and 2012 respectively this an indication that sales are increasingly contributing to the bottom line of the company. This measures how effectively a companys assets are being used to generate profits. It is majorly considered when evaluating the success of a business. A higher number reflects a well managed company with a healthy return on assets. The percent rate of return on assets for Home Retail Group is 0.022% in 2012 although there is a slight increase, there is still a need for improvement in this area to ensure the company can remain competitive and continue to operate successfully. This shows the rate of return on equity capital employed and also measures the ability of a companys management to realize an adequate return on the capital invested by the owners in a company. A higher number is preferred for this ratio. The percent rate of return on equity for Home Retail Group is 0.055% in 2012 and 0.0275% in 2010 there is a slight increase an indication that the management may not be effectively managing the profits earned based on the owners investment in the company. The management should utilize budgets to track expenses on a regular basis, and identify those that are out of line. Assign