Financial Ratio Analysis - Return on Fixed Assets

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Return on Fixed Assets

We'll use the Carphone Warehouse's results to demonstrate these new ratios.

Consolidated Profit and Loss Account	31 March 2001	25 March 2000
	£'000	£'000
Profit before interest and taxation	45,012	25,300
Total Fixed Assets	396,175	100,279
Net current assets (liabilities)	93,180	-2,660

Fill in this table and calculate the ratio values:

ROFA For the Carphone Warehouse
31 March 2001	Profit before Interest and Tax Fixed Assets	___________	= _____%
25 March 2000	Profit before Interest and Tax Fixed Assets	___________	= _____%

Did you get this?

A large difference between the results for the two years; 2001's performance was just less than half of 2000's result. We are assessing the efficiency of fixed assets and 25% is probably respectable. However, 11% is another matter and suggests a major change in efficiency between the two years.

Let's look at some other figures from the accounts that should help to explain what has happened to make this ratio fall so dramatically. The cost of sales has increased by 64% over the year and operating costs have increased by 37%; turnover has increased by 59% over the year

The Carphone Warehouse Consolidated Profit and Loss Account	31 March 2001	25 March 2000
	£'000	£'000
Turnover	1,110,678	697,720
Cost of sales	-830,126	-505,738
Gross profit	280,552	191,982
Operating expenses	-176,960	-129,359
Operating profit	66,016	41,389
Other costs/income	-21,004	-16,089
Profit before interest and taxation	45,012	25,300

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