Financial Accounting Case Study

Analysis and Comment on Highlow Engineering Profitability Commenting on Highlow Engineerings profitability and referring initially to the primary coil measure of issuing on Capital utilize (ROCE) we give notice slang that the return is good (possibly a little low) besides does mitigate from 2002 to 2003. Gross profit at 33.0 % in 2003 is excellent and shows a healthy year on year increase from 2001 onwards. Overheads oarlock around steady at around 17 % end-to-end the distributor point (though at that place is a subtle improvement between 2002 and 2003. Distribution cost could be of somewhat concern due to the tag up(a) movement between the years, these be should be investigated to see if they argon justified or if in that location is some need for bud shortenary control. Administration costs be favourable and good control is in place. Referring later to modal(a) wage to employee it may be executable that the company has presumption low pay-rises over the last hardly a(prenominal) years and this over again would need to be investigated to ensure there is not a disgruntled workforce. Sales to gross capital employed is decrease over the period as is sales to set(p) assets.

LIQUIDITY fluidness is an issue as there has been a steady (not sharp) marked decline in runniness and though we have not calculated the ability of the business to generate cash from production operations we know it has declined relative to the ill-judged term debts of 2002 and 2003. The runniness problem may be a planned sententious term position and linked to the heavy purchases in veh icles and equipment in 2002 and 2003. The qu! ick ratio being a little much(prenominal) stringent when checking liquidity shows the value moving towards 1, if the ratio becomes less(prenominal) than 1 then liquid authorized assets will not compensate current liabilities, which would further illustrate the potential liquidity problems in... If you emergency to get a full essay, order it on our website: BestEssayCheap.com

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