Urmi Finance

8/8/2019 Urmi Finance

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Introduction: Financial analysis is important to boards, directors, share holders, investors, and

others who make judgments about the financial health of organizations. One established method

of evaluating financial statements is ratio analysis, which uses data from the balance sheet and

income statement to produce values that have easily interpreted financial meaning of an

organization. My paper is about United Carpet Group where I analyze financial performance of

this company through financial ratio analysis as well as take a look on its non-financial

performance. After analyzing UCGs financial and non-financial performance I will try to focus

on a possible investment that UCG can take consideration. On my way to evaluating financial

statement this paper will focus on profitability, liquidity, efficiency and financial position of

UCG and for that I will use data from UCGs income statement, cash flow statement and balance

sheet for the year ended 2008 and 2009.

Methodology: The data I needed for analyzing UCGs performance is secondary data. I manage

to get the data from UCGs annual report that published in their web site, brochure and from

some publications.

Company overview: United Carpets Group is engaged carpet and bed retailing and franchising

of retail outlets. According to the annual report (March 31, 2009), the Company had 80 United

Carpets branded stores across its core areas of operation in Northern and Central England. It

operates in four segments: Franchising, Flooring, Beds and Trade sales. Its subsidiaries include

United Carpets (Franchisor) Limited, United Carpets (Northern) Limited, Debrik Investments

Limited, Weavers Carpets Limited, Nottingham Carpet Warehouse Limited, Carpetmania

Limited, United Carpets (Retailing) Limited and United Carpets (Central) Limited. During the

fiscal year ended March 31, 2009, it opened 11 new corporate stores in Wigan, Manchester

(Failsworth), Kidderminster, Birmingham (Hall Green), West Bromwich, Manchester (Gorton),

Wednesbury, Little Hulton, Birmingham (Kingstanding), Shrewsbury and Runcorn.

For my paper I have browsed UCGs website

(http://www.unitedcarpetsandbeds.net/coprorate_information.php) and find out that United

Carpet is a full-service floor covering company dedicated to delivering value to their customers.


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Its been operating successfully since last 25 years. While they are specialize in servicing

apartment owners and property managers in the multi-family market segment, they are also

experts in commercial and residential flooring. The list doesn't end there they have taken their

expertise in the multi-family business and applied it to meet the needs of residential builders and

homebuyers, remodeling companies and commercial contractors as well. They even operate a

full-service design center showroom, Floor Source Direct.

Management Hierarchy:

Products:

Carpet: As a staple in the multi-family industry, United carpet offer a wide variety of carpets

from the top manufacturers: Shaw, Mohawk and Beaulieu. Their participate in the Core Product

Program through Multifamily Solutions which partners with key carpet manufactures to provide

the best-performing broadloom products in the industry.

Sheet Vinyl: In addition to companys exclusive Armstrong vinyl product offering, called

PROGRESSIONS, they offer a varied selection of other sheet vinyl products from Armstrong,

Mannington and Congoleum. They also offer bed, flooring and cleaning service.

Chairman(PeterCowgill)

DirectorFinance(PR Eyre)

DirectorProduction(D

Grayson)

KSPiggott(non-executive)

CEO(IF Bowness)


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Financial Performance: In this section I will describe UCGs financial performance for the year

ended 2008 and 2009. For this purpose I will measure UCGs financial ratios and analyze them.

According to David A Palmer (2000) Ratios provide an insight into how a set of results

compare on a like for like basis with another set of results. They can help comparisons over time,

against budget, against other organizations or within an organization, between departments. They

can also be used to compare against pre-set benchmarks based on experience. They rarely answer

questions but they help the reviewer identify the right questions to ask, by highlighting

anomalies and tends.

In this paper I will concentrate on liquidity, profitability, efficiency, financial position and

investment prospect of UCG.

Liquidity: Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the

liquidity of the company as on a particular day. For example, the day that the Balance Sheet was

prepared. These ratios are important in measuring the ability of a company to meet both its short

term and long term obligations. According to Ross, Westerfield and Jordan (Essentials of

Corporate Finance, Sixth Edition, McGraw-Hill International, p.56-57) the primary concern of

liquidity is to measure firms ability to pay its bills over the short run without undue stress.

Consequently this ratios focus on current assets and current liabilities. Liquidity can be measured

and evaluated by calculating and interpreting following ratios,

y Current Ratioy Acid-Test Ratioy Cash Ratioy Total debt Ratio

Current ratio : According to Eric Fraint(2005) The current ratio is the best known of all ratios,

is a simple yet powerful measure of an organizations short-term liquidity, i.e., how well an

organization can meet its short-term debt obligations. This ratio is obtained by dividing the 'Total


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Current Assets' of a company by its 'Total Current Liabilities'. The ratio is regarded as a test of

liquidity for a company. It expresses the 'working capital' relationship of current assets available

to meet the company's current obligations.

In my analysis I have find out that at 31 march 2009 united carpet has a current asset of

7377000 and current liabilities is 5,290000 and in 2008 current assets was 7,033000 and

current liabilities was 4,540000 so their current ratio is 1.394 and 1.55.

According to Ross, Westerfield and Jordan (Essentials of Corporate Finance, Sixth Edition,

McGraw-Hill International, p.56-57) to a creditor, particularly short time creditor like supplier,

the higher the current ratio, the better and to the firm, the higher the current ratio indicates

liquidity, but it also indicate an inefficient use of cash and other short time assets. Firms expects

to see a current ratio of at least 1, because a current ratio of less than 1 would mean that net

working capital is negative and its unusual for a healthy firm. So here I can say that, UCG has

1.394 in current asset for every 1 in current liabilities or current liabilities covered 1.394 over

which is pretty good for a company. But still at 2008 their current ratio was 1.55 which was

better than 1.394. Although at 2009 UCG manage to increase their current asset but they also fail

to control their current liabilities and as a result their current ratio decreases from last year.

Acid-Test ratio: This ratio is obtained by dividing the 'Total Quick Assets' of a company by its

'Total Current Liabilities'. Sometimes a company could be carrying heavy inventory as part of its

current assets, which might be obsolete or slow moving. Thus eliminating inventory from current

assets and then doing the liquidity test is measured by this ratio. The ratio is regarded as an acid

test of liquidity for a company. It expresses the true 'working capital' relationship of its cash,

accounts receivables, prepaid and notes receivables available to meet the company's current

obligations. The difference between current ratio to quick ratio is simple; here inventory is

deducted from current assets. As sometimes stocks are a problem because they can be difficult to

sell or use. As for example a supermarket may have thousands of people walking in and outevery day, but it is not surprising that there will be some items on its shelves that don't sell as

quickly as the management would like. Similarly, there are some items that will sell very well.

So its quite difficult to get actual picture of liquidity performance of that supermarket. Hence

its better to determine the quick ratio as well as current ratio.


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According to United carpets balance sheet, in 2009 companys inventory is 2763000, current

asset is 7377000 and current liabilities is 5290000. And in 2008 companys inventory is

2,347000, a current asset is 7033000 and a current liability is 4540000. So its Acid-Test ratio is,

in 2009, 0.89 and in 2008, 1.03. The possible reason for UCGs declining Acid-test ratio is their

increasing inventory, current liabilities. From UCGs financial statement we can see that in year

2009 their inventory and current liabilities increase 416000 and 750000 from the previous year

and it's the reason that UCG is suffering from a low Acid-test ratio. As we already knows

inventory is the least liquid current assets and large inventories are often a sign of short-term

trouble so .87 times is not a very good Acid-Ratio and united carpets should consider it.

Cash Ratio: Some time a very short time creditor might be interested in the cash ratio. Cash

ratio measure the ability of a business to meet short term obligations. It measures to the extent

which current obligations can be paid from cash or near cash assets.

As we can see for the year 2009 companys cash is 1848000 and 2008 is 1,448000 so its cash

ratio for 2009 and 2008 are 0.35 and 0.31. So we can verify that cash ratio works out to be .35

for united carpets and its not a recommended cash ratio for a healthy company. Because although

UCG increase their cash a amount of 400000 but they fail to decrease their current liabilities.

From UCGs liquidity measure I have noticed that although company doing well by gathering

cash and improving current assets but they should have more concern about their increasing

liabilities and unused inventories. They should have more careful about what they are producing

is fulfilling their market demand so that they dont have to worry about their inventories.

As we know most of time investors are more interested to know companies long term solvency

rather than its short term solvency so here we will try to look at united carpets financial leverage

ratios. For this we will calculate its Total debt ratio.

Total debt ratio: This ratio is obtained by dividing the 'Total Liability or Debt ' of a company by

its 'Owners Equity or Net Worth'. The ratio measures how the company is leveraging its debt

against the capital employed by its owners. If the liabilities exceed the net worth then in that case

the creditors have more stake than the shareowners.


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From companys year 2009 balance sheet we find out that united carpet has 12832m as its total

asset and 4923m as its total equity. And in 2008 its total assets is 11,350 m and equity is 4,957

m So its total debt ratio are 0.62 for year 2009 and 0.56 for year 2008. So we can say that united

carpet has .62 in debt for every 1 in assets at the year 2009 whether at 2008 it was 0.56.

Now we will look at united carpets profitability measures.

Profitability Ratios: A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs incurred during a specific

period of time. Patra K. and Panda J.K. (2006) argued that the ability to earn maximum amount

of profit from the available sources by the business concern is known as Profitability. For most

of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a

previous period is indicative that the company is doing well. It can be measured by calculating

and interpreting following ratios,

Gross profit margin Net profit margin Expense on sales Return on assets Return on equity

Gross profit margin: According to Jones, Allen N ( "Financial Statements: When Properly

Read, They Share a Wealth of Information." Memphis Business Journal. February 5, 1996.

Larkin, Howard) Gross profit margin measures the margin on sales the company is achieving. It

can be an indication of manufacturing efficiency or marketing effectiveness and also indicator of

how much profit is earned on companys products without consideration of selling and

administration costs.

From companys income statement for 2009 I find out that at the year 2009 united carpets madea gross profit of 17134m and sales is 26792m. so its gross profit margin are 63.9 for the year

2009 and 68.5 for the year 2008. This tells us that at 2009 UCG, in an accounting sense, generate

a little less than 64 pens for every pound in sales which was 68.5 pens at the year 2008 which is

obviously not desirable. According to UCGs chairman statement this happens because the

increase in new corporate stores has changed the business mix and this is reflected in the gross


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margin which reduced from 68.5% to 64.0% reflecting the reduction in the proportion of

franchise related income to total revenue as corporate stores turnover, beds and trade sales

accounted for a greater proportion of revenue.(source: United Carpet Group, Annual Report 2009)

Net profit margin: el Jones, Allen N (1996) Net profit margin measures the overall

profitability of the company, or how much is being brought to the bottom line. Strong gross

profitability combined with weak net profitability may indicate a problem with indirect operating

expenses or non-operating items, such as interest expense. In general terms, net profitability

shows the effectiveness of management. Though the optimal level depends on the type of

business, the ratios can be compared for firms in the same industry.

In 2009 United carpets had a Revenue of 26792m and Net profit was 1,364m and in 2008 Its

revenue was 21,166m and net profit was 1,511m. So their Net profit margin ratio is,5 for the year

2009 and 7.1 for the year 2008. This tell as that UCG generate 5 pens as net profit for every 1

pound of net sales whether at the year 2008 they generate a net profit of 7.1 pens for every pound

of net sales. In UCG annual report 2009 president Peter Cowgill mentions that this happens

cause of global recession where as every other industry UCG also lose an amount of 147m from

their net profit. This explanation is acceptable because I have found out that due to economicrecession every company in home decoration industry having these difficulties.

Expenses on sales: is known as one of the fundamental ratios to monitor Economic Efficiency

of any profit generating entity. To be more specific, if the entity is known as marketing

organization then this ratio is more crucial to measure its economic efficiency.

In 2009 United carpets had an admin expense of 13,065m and revenue was 26792m and in 2008

it was 11,142m and 21,166m. So expense on sales is, 48.7 for the year and 52.6 for the year 2008.

As UCG is a home furniture retailer so its good to see their expense on sales reducing in this

economical recession but when every company trying to cut their cost from admin expense UGC

unfortunately increasing it. May be it because UGC wants to reduce their tax but still I think they

should try to increase their revenue not admin or other expense.


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Return on assets: According to Jones, Allen N (1996) Return on asset indicates how effectively

the company is deploying its assets. A very low ROA usually indicates inefficient management,

whereas a high ROA means efficient management. However, this ratio can be distorted by

depreciation or any unusual expenses. The Return on Assets of a company determines its ability

to utilize the Assets employed in the company efficiently and effectively to earn a good return.

The ratio measures the percentage of profits earned per dollar of Asset and thus is a measure of

efficiency of the company in generating profits on its Assets.

Here we can see for year 2009 united carpets profit for the year is 324m, total asset is 12832m

and in 2008 they are 939m and 11,350m so its Return on assets is a percent of 2.5 in the year

2009 and a percent of 8.2 in the year 2008. For UCGs financial statement I have find out that

although companys total assets increase an amount of 1482m from the previous year but its

profit for the year depressingly decreased from 939m to 324m which is 3 times lesser than 2008.

My recommendation is that UCGs management should take this serious consideration because it

will affect their share holders as well as long term investor can be demotivated with this

decreasing numbers.

Return on Equity: The Return on Equity of a company measures the ability of the management

of the company to generate adequate returns for the capital invested by the owners of a company.

Generally a return of 10% would be desirable to provide dividends to owners and have funds for

future growth of the company.

As for the year 2009 companys total equity is 4923m, profit for the year 324m and in 2008 it

is 4,957m and 939m so its Return on equity is, an amount of 6.5 for the year 2009 and 18.9 for

the year 2008. This is an alarming situation for UCG because although companys owners

equity is almost same but its profit of the year is decreasing at a depressing rate. Last year it was

939m but 2009 it decreases almost 3 times and become 324m. For this UCGs return on equity

dropped from 18.9 to 6.5.


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Efficiency Ratio: Efficiency ratios are ratios that come off the Balance Sheet and the Income

Statement and therefore incorporate one dynamic statement, the income statement and one static

statement, the balance sheet. These ratios are important in measuring the efficiency of a company

in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into

the ability of a company to meet both its short term and long term obligations. This are some

ratio that are needed to measures companys efficiency:

Inventory turnover: The inventory turnover ratio is one of the most important financial ratios.

Of all the asset management ratios, it gives the business owner some of the most important

financial information. The inventory turnover ratio measures the efficiency of the business in

managing and selling its inventory. This ratio gauges the liquidity of the firm's inventory. It also

helps the business owner determine how they can increase their sales through inventory control.

As we can see in the year 2009 and 2008 United carpets net sales is 9,658m and 6,664m and

inventory is 2,763m and 2,347m so, their Inventory turnover is, 3.49 for the year 2009 and 2.84

for the year 2008. Generally, a high inventory ratio means that the company is efficiently

managing and selling its inventory. The faster the inventory sells, the less funds the company has

tied up. Companies have to be careful if they have a high inventory turnover as they are subject

to stock outs.

Stock turnover of days or Days sales of inventory: A financial measure of a company's

performance that gives investors an idea of how long it takes a company to turn its inventory into

sales. Generally, the lower the DSI the better, but it is important to note that the average DSI

varies from one industry to another. Here in 2009 and 2008 united carpet had a cost of sales of

9,658m and 6664m and Inventory 2,763m and 2,347m. So their Days sales of inventory is, 104

days and 128 days. I will say this is a good improvement because we know too much inventory

can be a headache for a company.


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Accounts Receivable turnover Ratio: The accounts receivable turnover ratio measures the

effectiveness of a firm's credit policies and its ability to collect its debts.

Here in 2009 and 2008 United carpets sales and Account receivables are as follows

Year Sales Account receivable

2009 26,792 2,766

2008 21,166 3,238

So their Account Receivable turnover Ratio is,

Account Receivable turnover Ratio= Sales/ Account Sales

2009 2008

9.68 times 6.53 times

A low accounts receivable turnover ratio indicates that the company either is not stringent

enough with its credit policies or having difficulties collecting from its customers; therefore, the

higher the ratio, the better. However, a high ratio may indicate that the company deals mostly in

cash with very little credit extensions or is efficient with its collections. Just like other ratios,accounts receivable turnover varies greatly between industries and comparisons should be

limited to competitors within the same industry or sector. Here we see UCG manage to have a

good account receivable turnover ratio by their good credit policies.

Days sales in receivable: This calculation shows the average number of days it takes to collect

our accounts receivable or number of days of sales in receivables.

From the previous table I have found that at 2009 and 2008 Companys Receivable turnovers are

9.68 and 6.53. S their Days sales in receivable are,

Days sales in receivable= 365/receivable turnover

2009 2008

37 days 55 days


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Asset turnover Ratio: The asset turnover ratio measures the ability of a company to use its

assets to generate sales. The total asset turnover ratio considers all assets including fixed assets,

like plant and equipment, as well as inventory and accounts receivable.

Here in 2009 and 2008 united carpets revenue and net assets are shows in the following table,

Year Revenue Net asset

2009 26,792 12,832

2008 21,166 11,350

So their Asset turnover Ratio is

Asset turnover=revenue/net assets

2009 2008

2.08 1.86

Total Asset Turnover ratio should always be compared to the industry average because it varies

greatly between different industries. In capital-intensive industries Total Asset Turnover ratio is

typically less than one, while in retail and services companies it may be over ten. So its

acceptable.


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Financial position Status of a firm's assets, liabilities, and equity accounts as of a certain time,

as shown on its Financial Statement; also called financial condition. To understand financial

position of a company we use certain ratios. They are as follows:

Interest Cover Ratio: The interest cover ratio gives us an indication of the ability of our

business to meet ongoing interest bills and therefore service debt.

Here in 2009 and 2008 companys profit before tax and financial cost are shown in the table

bellows,

Year Profit before tax Financial Costs

2009 595m 271m

2008 1,511m 572m

So their Interest cover Ratio is, Interest cover=profit before tax/financial cost

2009 2008

2.19 2.64

As we know interest cover affect long-term solvency. So the lower the interest cover, the greaterthe risk that profit (before interest) will become insufficient to cover interest payments. Here we

see UCGs interest cover ratio was 2.64 at the year 2008 but at 2009 it reduce and become 2.19.

Gearing Ratio: Gearing measures the proportion of assets invested in a business that are

financed by borrowing. In theory, the higher the level of borrowing the higher is the risks to a

business.

Here in 2009 and 2008 companys long term liabilities and equity is shown in the table belows,

Year Long term Liabilities Equity

2009 2,619 4,923


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2008 1,853 4,957

So their gearing ratio=long term liability/equity.

2009 2008

0.53 0.37

As we know gearing ratio indicates the measures the percentage of capital employed that is

financed by debt and long term finance. So higher gearing ratio means higher dependence on

both borrowings and long term financing and lower gearing ratio means higher dependence on

equity financing. Here we can see at 2008 UCGs gearing ratio was 0.37 but at 2009 it increase

to 0.53. that means UCG increase their liabilities from borrowing money from market and its not

healthy for a company.

Investment appraisal: The financial managers must make investment decisions. This process

requires investment appraisal. There are only two types of methods available for investment

appraisal during making this decision such as traditional methods and discounted cash flow

techniques. Traditional methods include the Average Rate of Return (ARR) and the Payback

method; discounted cash flow (DCF) methods use Net Present Value (NPV) and Internal Rate of

Return techniques. In this paper I will evaluate some of the project that UCG is considering for

their next financial year.

NPV: United carpet is going to launch a new consumer product. Based on projected sales and

cost, they expected that the cash flows over the five years life of the project will be 2000 in the

first two years, 4000 in the next two, and 5000 in the last year. It will cost about 10000 to begainthe production and they use a 10% discount rate to evaluate new products.

So its Present Value is =

2000/(1+0.1)+2000/(1+0.1)2+4000/(1+0.1)3+4000/(1+0.1)4+5000/(1+0.1)5

= 1818+1653+3005+2732+3105


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=12313

The present value of the expected cash flow is 12313, but the cost of investment is 10000. So the

Net Present Value is,

NPV = 12313-10000

= 2313

Based on the Net Present Value rules as it is positive so United Carpet should accept the project.

Payback Period: Another project in United Carpet cost 500k and their cash flows are shown in

the table below:

Year Cash flow Accumulated cash flows

1 100k 100k

2 200k 300k

3 500k 800k

Here we can see, after the first two years the accumulated cash flow is 300k. after the third year,

the accumulated cash flow becomes 800k. so the project pays back sometime between the end of

year 2 and the end of year 3. Since the accumulated cash flows for the first two year are 300k so

they need to recover 200k in the third year. The third year cash flow is 500k so they have to wait

200/500= 0.40 year to do this.

So the Payback Period is 2.4 years

Or, 2 years and five months.

Accounting Rate of Return ( ARR ):

ARR = Average net profit/Average investment.

Or, O-D/I Here, 0= Average annual incremental and inflow from operation.

D= The incremental average annual depreciations.

I= Initial Investment.


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Here we can see, The Company invested in the constructor of business machine whose

investment cost is 607500, useful life is 4 years, estimated disposal value is 0 and expected

annual cash flow is 200000.

So Annual Depreciation would be

= original investment/useful life

= 607500/4

= 151875

So the Accounting Rate of Return (ARR) = 200000-151875/607500

=7.92%

IRR: IRR is defined as the discount rate which makes the net present value of a project equal to

zero. In mathematical terms, IRR is the projected discount rate that makes the net present value

(NPV) calculation equal to zero.

Suppose United Carpet have a project that cost 100 today and pays 110 in one year. Here

discount rate is 10%.

So NPV = -100+110/(1+R)

100=110/(1+R)

1+R=110/100

1+R=1.10

R=10%


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Non-Financial performance: Non-financial performance indicators are as important as

financial measures in assessing the success of a company. Offering the products or services that

the consumers want, ensuring the quality of these commodities and delivering them on time are

all non-financial ingredients of success.

Quality of the company: United offers High Quality service and always sticks to their quoted

price and are on time. Their mission is bringing value for moneyto everyone which means

United Carpets offers is to deliver the widest choice, the best quality, at the most competitive

prices, every time.

They have verity of carpets for every location and budget. Like they have Roll End bargains,

Prestige carpets, Roll stock carpets.

They offer free carpet fitting with all carpet orders which include underlay from their bronze

range or above.

The most interesting is their price promise where they says If within 28 days of purchasing your

carpet you find the same carpet on sale and in stock at another carpet retailer at a lower price we

will refund the difference.

SWOT analysis:

Strength

Well known brand.

Have goodwill

Well distribution channel

Good after sales service

Weakness

High price compare to competitors.

Limited market

Opportunities

Expend their market

Can enter to other industries

Threats

Low entry barriers

Competitors


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kaplan and nortons structure:

customer prospective: Company offers a final dividend of 0.50p per share (2008: 0.55p). There

was no interim dividend (2008: 0.275p). Subject to approval at the Annual General Meeting, the

final dividend will be paid on 4 December 2009 to those shareholders whose names are on the

register on 6 November 2009.

Financial prospective ratio: Although 2009 is has been an extremely challenging trading period

but the company announce that the Group delivered a solid trading performance for the year.

Revenues increased to 26.79m and profit before tax and exceptional items, although down on

the previous year, was slightly ahead of expectations at 1.36m. The business has expanded

during the period, with the addition of a further 15 stores.

Conclusion: Although insufficient information and time was my limitation to do this study but

with this limited resource I have find out that although UGC improve its efficiency but its

liquidity and profitability is not in a good shape. But as companys chairman said global

economic recession can be the major cause of it but still I think UGC should be more concern

about its liabilities and the yearly profit they have to generate to get a happy shareholder and to

survive this competitive market.


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Appendix:

Currentratio :

Current ratio = current assets/current liabilities

2009 2008

= 7377000/5290000

1.394

=7,033000/4,5400001.55

Acid-testratio :

Acid-test ratio = current assets-inventory/current liabilities

2009 2008

= 7377000-2763000/5290000

=4614000/5290000

0.87

= 7033000-2,347000/4540000

=4686000/45400001.03

Cashratio :

Cash Ratio = cash/current liabilities

2009 2008

=1848000/5290000

0.35

1448000/4,540000

0.31

Totaldebtratio :

Total debt ratio = total asset-total equity/total asset

2009 2008

12832-4923/12832 11,350-4,957/11,350


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0.62 0.56

Profitability:

Gross profitmarginratio :

Gross profit margin = gross profit/revenue*100

2009 2008

= 17134/26792*100

= .639*100

63.9

14,502/21,166*100

=.685*100

68.5

Net profitmargin :

Net profit Margin ratio= (profit before interest and tax/revenue)*100

2009 2008

1,364/26792*100.050*1005

1,511/21,166*100.071*1007.1

Expenseon sales:

Expenses on sales=admin expenses/revenue*100

2009 2008

13,065/26792*100

.487*10048.7

11,142m/21,166m*100

52.6

Returnonequity :

Return on equity = profit for the year/total equity*100


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2009 2008

= 324/4923*100

= .065*100

= 6.5

939m/4,957m*100

=.189*100=18.9

Returnonassets:

Returnonassets =( profitforthe year/totalassets)*100

2009

= 324/12832*100

= .025*100

= 2.5

939m/11,350m*100

=8.2

Inventory turnover:

Inventory turnover = Net sales/inventory

2009 2008

9,658m/2,763m3.49

6,664m/2,347m2.84

Days sales ofinventory:

Days sales of inventory = ( Inventory/Cost of sales)*365

2009 2008

2,763m/9,658m*365104 days

2,347m/6664m*365128 days


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Account Receivable turnover Ratio

2009 2008

26,792/2,7669.68 times

21,166/3,2386.53 times

Days sales in receivable

2009 2008

365/9.68

37 days

365/6.53

55 days


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Reference:

-Eric Fraint (2005), BEHIND the NUMBERS: The Use and Misuse of Ratio Analysis

- David A Palmer (2000),Financial Accounting, Reviewing Financial Data: Ratio Analysis

No.131

- Ross, Westerfield and JordanEssentials of Corporate Finance, Sixth Edition, McGraw-Hill

International

- Patra, K. and Panda, J.K. (2006) Accounting and finance for managers, New Delhi: Sarup &

Sons.

- Jones, Allen N (1996) Financial Statements: When Properly Read, They Share a Wealth of

Information." Memphis Business Journal. February 5, 1996. Larkin, Howard

-United Carpet Group [online] Available from

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