1
Greenspace Ratio Analysis
Name
Institution
Date
, 2
Table of Contents
1.0 Introduction...........................................................................................................................................3
2.0 Ratio Calculations..................................................................................................................................3
2.1 Profitability Ratios..............................................................................................................................3
2.1.1 Return on Capital Employed.......................................................................................................3
2.1.2 Operating Profit Margin..............................................................................................................4
2.1.3 Gross Profit Margin.....................................................................................................................5
2.1.4 Return on Shareholders Fund.....................................................................................................5
2.2 Efficiency Ratios.................................................................................................................................6
2.2.1 Inventory Turnover Days.............................................................................................................6
2.2.2 Asset Turnover Ratio...................................................................................................................7
2.2.3 Receivables Collection Period.....................................................................................................7
2.2.4 Payable Payment Days................................................................................................................8
2.2.5 Working Capital Cycle.................................................................................................................8
2.3 Liquidity Ratios...................................................................................................................................9
2.3.1 Quick Ratio..................................................................................................................................9
2.3.2 Current Ratio.............................................................................................................................10
2.4 Gearing Ratios..................................................................................................................................11
2.4.1 Interest Cover Ratio..................................................................................................................11
2.4.2 Gearing Ratio............................................................................................................................12
2.5 Investment Ratios............................................................................................................................13
2.5.1 Dividends per Share..................................................................................................................13
2.5.2 Earnings per Share....................................................................................................................14
2.5.3 Dividend Payout Ratio...............................................................................................................14
3.0 Long-term Investment Decisions.........................................................................................................15
3.1 Payback Period.................................................................................................................................15
3.2 Net Present Value............................................................................................................................15
4.0 Conclusion...........................................................................................................................................15
5.0 Bibliography.........................................................................................................................................17
6.0 Appendix- Workings.............................................................................................................................19
, 3
1.0 Introduction
The Corporate Finance Institute (2022) defines ratio analysis as a quantitative method through
which it becomes possible to gain insight into the operational efficiency, liquidity, and
profitability of a company (Corporate Finance Institute, 2022). This is achieved by the careful
analysis of the financial statements of a firm such as income statements and balance sheets.
Albertus and Lestari (2022) underline that ratio analysis proves to be the cornerstone of an equity
analysis (Albertus and Lestari, 2022). Ratios are primarily utilized by external analysts in the
determination of different business aspects in a way that helps in understanding the changes
necessary (Manalu et al., 2020; Corporate Finance Institute, 2022). The purpose of this report is
to analyze the performance of Greenspace Supplies Limited in both 2020 and 2021 in an attempt
to provide a comparative review and determine the changes evident as well as how any of these
changes affect the overall business performance.
2.0 Ratio Calculations
2.1 Profitability Ratios
2.1.1 Return on Capital Employed
Return on capital employed is a profitability ratio that measures how a company is efficiently
using its available capital to generate profits (Corporate Finance Institute, 2022). This ratio is
mainly used by investors who are keen on determining whether a firm is suitable for investment
or not. The ratio is calculated as:
Return on Capital Employed (ROCE) = Operating Profit/Capital Employed *100%
Return on Capital Employed Summary Table
Particulars 2020 (in thousands) 2021 (in thousands)
Operating profit 1,189 543
Capital Employed 7,486 7,317
ROCE (OP/CE *100%) 15.88% 7.42%
Greenspace Ratio Analysis
Name
Institution
Date
, 2
Table of Contents
1.0 Introduction...........................................................................................................................................3
2.0 Ratio Calculations..................................................................................................................................3
2.1 Profitability Ratios..............................................................................................................................3
2.1.1 Return on Capital Employed.......................................................................................................3
2.1.2 Operating Profit Margin..............................................................................................................4
2.1.3 Gross Profit Margin.....................................................................................................................5
2.1.4 Return on Shareholders Fund.....................................................................................................5
2.2 Efficiency Ratios.................................................................................................................................6
2.2.1 Inventory Turnover Days.............................................................................................................6
2.2.2 Asset Turnover Ratio...................................................................................................................7
2.2.3 Receivables Collection Period.....................................................................................................7
2.2.4 Payable Payment Days................................................................................................................8
2.2.5 Working Capital Cycle.................................................................................................................8
2.3 Liquidity Ratios...................................................................................................................................9
2.3.1 Quick Ratio..................................................................................................................................9
2.3.2 Current Ratio.............................................................................................................................10
2.4 Gearing Ratios..................................................................................................................................11
2.4.1 Interest Cover Ratio..................................................................................................................11
2.4.2 Gearing Ratio............................................................................................................................12
2.5 Investment Ratios............................................................................................................................13
2.5.1 Dividends per Share..................................................................................................................13
2.5.2 Earnings per Share....................................................................................................................14
2.5.3 Dividend Payout Ratio...............................................................................................................14
3.0 Long-term Investment Decisions.........................................................................................................15
3.1 Payback Period.................................................................................................................................15
3.2 Net Present Value............................................................................................................................15
4.0 Conclusion...........................................................................................................................................15
5.0 Bibliography.........................................................................................................................................17
6.0 Appendix- Workings.............................................................................................................................19
, 3
1.0 Introduction
The Corporate Finance Institute (2022) defines ratio analysis as a quantitative method through
which it becomes possible to gain insight into the operational efficiency, liquidity, and
profitability of a company (Corporate Finance Institute, 2022). This is achieved by the careful
analysis of the financial statements of a firm such as income statements and balance sheets.
Albertus and Lestari (2022) underline that ratio analysis proves to be the cornerstone of an equity
analysis (Albertus and Lestari, 2022). Ratios are primarily utilized by external analysts in the
determination of different business aspects in a way that helps in understanding the changes
necessary (Manalu et al., 2020; Corporate Finance Institute, 2022). The purpose of this report is
to analyze the performance of Greenspace Supplies Limited in both 2020 and 2021 in an attempt
to provide a comparative review and determine the changes evident as well as how any of these
changes affect the overall business performance.
2.0 Ratio Calculations
2.1 Profitability Ratios
2.1.1 Return on Capital Employed
Return on capital employed is a profitability ratio that measures how a company is efficiently
using its available capital to generate profits (Corporate Finance Institute, 2022). This ratio is
mainly used by investors who are keen on determining whether a firm is suitable for investment
or not. The ratio is calculated as:
Return on Capital Employed (ROCE) = Operating Profit/Capital Employed *100%
Return on Capital Employed Summary Table
Particulars 2020 (in thousands) 2021 (in thousands)
Operating profit 1,189 543
Capital Employed 7,486 7,317
ROCE (OP/CE *100%) 15.88% 7.42%
