The Net Profit Margin has increased by 1.2% since 2012. This shows that TMCS is successfully turning its revenue into profits. The Net Profit can be influenced by a range of internal and external factors such as wages and salaries, inflation and changes in tax rates. Tax charges for TMCS increased by around 13.7% from £65,910 in 2012 to £76,618 in 2013. Given the competitive nature of the IT industry, TMCS operates in an environment where the market segments influence selling price and production costs. Variations in accounting policies such as the Historical cost concept used by the company can also affect the Net Profit Margins.
The Asset Turnover for the company is relatively modest at 28, although this has fallen by 7% since 2012 (35). This ratio suggests that TMCS is utilizing its assets at an efficient level. The higher turnover shows that the company has an effective management structure in place due to the management team being augmented, further boosting the business performance. This in theory, gives investors and creditors a positive view of how well the assets are used by the company to produce sales. Indeed, net assets for the year 2013 increased to £344,132 from £256,097 in the previous …show more content…
The Interest cover has increased from 39.48 in 2012 to 66.28 in 2013 and shows that TMCS is able to pay back interest 27 times more than it did a year before. This reflects a high margin of safety for the company in paying interest payments in a given financial period and is vital for future survival, should financial complications inevitably occur. Companies with very low interest coverage risk going into default as they won’t be able to pay back its interest or debt whatsoever. Large corporations on the other hand however, normally have high interest cover and high borrowing levels because of their ability to pay back large payments of