Saira Computers Ratio Analysis

1000 Words 4 Pages
Ratios can be used to monitor and interpret financial performance of Saira Computers. Ratio analysis is an effective way to compare overall performance of Saira Computers in the industry. There are three different ratios which are profitability, liquidity and efficiency.
Profitability ratio measures how much profit Saira Computers generate, in this ratio, there are three main ratios which are gross profit and this margin measures gross profit of this business as percentage of sales revenue and net profit which measures this organisation net profit as percentage of sales revenue, finally ROCE which measures the business efficiency using the capital to produce profit. The gross profit for Saira Computers is 64% and comparing this ratio with
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Comparing this figure to 2016 figure it is higher by 3% stating it has improved from last years figures. This shows that Saira Computers have improved on their net profit margin by increasing sales revenue and decreasing cost of sales or business expenses where it has gone up by 3% making it 35% in net profit. This business has improved by increasing their sales revenue and business expenses which can affect this business in the future where it could make higher net profit margin and make more profit on its sales. ROCE for Saira Computers is 30% which shows this business is getting a good return on their sales and it also shows that Saira Computers are using their capital more productively in the business to make profit and sales. Comparing this figure to 2016 ROCE figure there is a difference of 2% showing 2016 figure was 28% and Saira Computers have improved by decreasing the level of capital being invested into the business or increasing their net profit making ROCE margin higher and getting good return as well. This means in future if this business carries on like this then it would probably be getting a higher good return on their …show more content…
In this ratio, there are two main ratios which are current ratio and acid test ratio. Current ratio figure for Saira computers is 1.56:1 meaning this business can cover the liabilities for the business expenses for example it would have 1.56 to cover 1 which is good, and this business would also have money left over. Current ratio must lie between 1.5 to 2.1 and below 1.5 shows the business is in a vulnerable position and higher than 2.1 shows the business is in a loss-making form with too much capital. Referring to 2016 figures for current ratio it was 1.9:1 stating this year the business current ratio was less by 0.34 which shows this margin is starting to decline where her business in future would not be able to cover the liabilities. This could affect the business as it is not becoming stronger in liquidity ratio margin. However, this could be improved by selling the business fixed assets into cash or short-term assets to boost the current ratio margin and to cover the cost as well. This business can also focus on boosting their long-term debts rather than short-term which improves current ratio for Saira

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