Additional question 18 solution
The Jarvis Porter Group is a printing and manufacturing business and the following table contains the basic ratios under the headings given in the question.
| Jarvis Porter Group | 2001 | 2000 |
|---|---|---|
| Profitability | ||
| Gross profit margin | 13.72% | 22.23% |
| Operating profit margin | -7.23% | -23.51% |
| Net profit margin | -7.23% | -21.80% |
| Retained profit margin | -6.17% | -55.00% |
| Gross Profit mark up | 15.90% | 28.58% |
| Rate of Return | ||
| Return on Capital Employed | -16.04% | -98.28% |
| Return on Total Assets | -11.18% | -40.45% |
| Liquidity | ||
| Current ratio | 1.7 | 1.7 |
| Acid Test (Liquid) Ratio | 1.1 | 1.1 |
| Asset Usage | ||
| Total Asset Turnover | 1.55 | 1.86 |
| Stock Turnover | 48.30 | 49.77 |
| Debtors' Turnover | 72.72 | 53.62 |
| Creditors' Turnover | 91.60 | 88.90 |
Along with several businesses in the database, the Jarvis Porter Group has been going through a period of change and possibly difficulty. Although its profitability ratios are largely negative, they have improved over the two year period.
The five year summary data confirm the turmoil that this business has been going through; although generally, the group has been growing and improving its profit before tax margin and its rate of return. In place of asset turnover we have shareholders' funds turnover and that is a little volatile suggesting uncertain overall management of the business, or a volatile time for the economy and the sector in which they operate.
Otherwise, the working capital and asset usage ratios all seem to bode well for the group except that we have the usual problem with debtors and creditors' turnover ratios probably being in need of revision if we had the additional data to work with.
| Ratios | 1997 | 1998 | 1999 | 2000 | 2001 |
|---|---|---|---|---|---|
| Profit before tax margin | 13.00% | 13.83% | 4.70% | -0.18% | -7.15% |
| ROCE | 44.29% | 53.23% | 21.28% | -0.75% | -18.61% |
| Shareholders' funds turnover | 3.41 | 3.85 | 4.53 | 4.07 | 2.60 |
| Earnings/(loss) per share (pence) | 14.6 | 20 | -5.4 | -54.9 | -7.7 |
| Adjusted earnings/(loss) per share (pence) | 17.7 | 20 | 5.3 | -3.4 | -7.7 |
| Equity dividends (pence) | 7.35 | 7.8 | 3.75 | 70 | 0 |
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