Financial Ratio Analysis - Return on Working Capital

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Return on Working Capital

Without any help from us, you have all of the data (repeated below) to enable you to calculate the ROWC ratio for the Carphone Warehouse ... do that and interpret what you find.

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

ROWC For the Carphone Warehouse
31 March 2001	Profit before Interest and Tax Working Capital	___________	= _____%
25 March 2000	Profit before Interest and Tax Working Capital	___________	= _____%

You will find this additional information of use for your analysis:

Carphone Warehouse Consolidated Balance Sheet	31 March 2001	25 March 2000
Current assets	£'000	£'000
Stock	52,437	51,842
Debtors due within one year	149,200	82,826
Short-term investments	46,374	11,144
Cash at bank and in hand	67,517	25,348
Total Current Assets	315,528	171,160
Creditors: Amounts falling due within one year	-222,348	-173,820
Net current assets (liabilities)	93,180	-2,660

Did you get this?

There has been a major improvement in ROWC between the two years - there is now a positive working capital balance. In 2000 there was a negative balance. Moreover, whilst current liabilities have increased by 28%, other aspects of working capital have increased sufficiently to more than offset that. The Carphone Warehouse is in a much better position in 2001 than it was in 2000.

You can now attempt some additional questions or move on to Inter-firm Comparisons

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