Assets turnover ratio: Formula of this ratio is-
Assets Turnover Ratio = Turnover/ Total assets
Assets turnover ratio
From the above calculations of Assets turnover ratio it is found that the ratio are calculated in times and in 2015 the ratio is maximum than 2013 and 2014 that is 0.026 times but the figure is very low, that Barclays financial manager should have to increase turnover by increasing operational efficiency.
Debtor’s turnover ratio: It can be calculated as-
Debtors turnover ratio = Turnover / Debtors + Bills receivable
Debtors turnover ratio
From the above measurement the debtors turnover ratio of 2013 is maximum than the other two years. In 2015 it is 20.78 times but in 2013 it was 22.56 times that the figure has been decreased as the amount of debtors is low than the other years.
Creditor’s turnover ratio: Formula of this ratio-
Creditors Turnover ratio= Turnover/ Creditors
Creditors turnover ratio
Creditor’s turnover ratio from the above table has been computed in times and it has been found that it is maximum in 2015. This indicates that the company pays their suppliers in time that is good for the company that the ability of paying off the creditors is high of Barclays PLC in this regard that the ratio is 2.37 times in 2015.
Shareholders equity and borrowed capital are the main components for calculating the gearing ratios such as capital gearing ratio and interest coverage ratio in order to measure the financial leverage and trading on equity capacity of a company.
Capital Gearing Ratio: Capital gearing ratio of a company help to analyse the organisational structure including the stockholders fund for fixed interest payment for a particular period of time. It can be calculated as-
Capital Gearing ratio= Common stock holders Equity/ Interest bearing bonds
Stock holders fund
Fixed interest payments
Capital gearing ratio
It has been found from the above table that the capital gearing ratio for 2014 is higher than 2014 and 2015 that is 14.42. Interpretation of the capital structure in order to measure the relationship between different sources of funds at a fixed interest rate is evaluated through this ratio. In this case the company is considered as the low geared that the larger portion of stock holders fund is composed by the equity capital.
Interest Coverage Ratio: In order to measure and evaluate a company’s ability to make their payments for interest this ratio should have to be measured by the business analyst effectively and efficiently. It helps to understand the profitability and risk related to the company from which the creditors and investors can expect risk and return in future (Ivanov et al. 2015, p.153). Interest coverage ratio of Barclays plc should have to be calculated in order to identify financial position. Formula of this ratio-
Interest coverage ratio = Earnings before Interest and Taxes (EBIT)/ Interest expenses
Interest coverage ratio
From the above table it has been found that interest coverage ratio is maximum in 2015 that is 1.45 from the other financial years.
Profitability ratios are the measurement of financial performance of a company for a particular financial period from which it can be understood the generations of earnings and profits and the ability of the company to meet the long and short term obligations appropriately. In this regard the selected company Barclays PLC’s profitability ratios are mainly Gross profit ratio, Net profit ratio, Return on capital employed and Return on assets.
Gross profit ratio: Gross profit ratio can be calculated as- Gross profit/ Sales* 100
Gross profit ratio
As in the income statement of Barclays plc, there is no gross profit; the gross profit ratio cannot be calculated.
Return on Capital employed: It can be calculated as-
ROCE = EBIT/ Capital employed* 100
Return on Capital Employed
In order to measure operational effectiveness and efficiency of business this ratio should have to be calculated. In 2013 it is higher that is 20.09% which indicates that performance level of the company has been decreased in 2015 that this ratio is 11.23% in 2015.
Net profit ratio: It can be calculated as-
Net profit ratio= Net profit/ Sales*100
Net profit ratio
From the above calculation it can be concluded that net profit ratio in 2013 is higher than other two financial years as the company’s net profit in 2015 has been decreased for which the net profit ratio is also decreased in this year to 2.10%. From this analysis it can be said that the company should have to improve profitability by improving their services effectively.
Return on Assets: Formula for this ratio is-
Return on Assets = Profit After tax/ Total assets *100
Profit After Tax
Return on Assets
Return on assets ratio is lower in these financial years which mean that the company Barclays plc is not so profitable and efficient relative to its total assets.
Ratios relating to the investment analysis for Barclays plc can be calculated as follows-
EPS: Earnings available to Equity shareholders/ Number of shares
Number of shares
Earnings per share
From the above calculation it has been found that the organisation’s Earnings per share has been decreased from 2013 to 2015 as earnings available to equity shareholders has also been deceased that lead to decline the earnings per share as to 5.43.
Dividend payout ratio: Dividend per share/ Earnings per share * 100
Dividend per share
Dividend payout ratio
Dividend payout ratio of the organisation is in negative figure as dividend per share to equity shareholders is in negative amount for which the organisation can face difficulties.
Dividend yield ratio: Dividend per share/ Market price per share *100
Market price per share
Dividend yield ratio
From the above table it is found that dividend yield ratio is in negative terms as dividend per share to equity and preference shareholders is so low that the company can face loss if the shareholders and investors unable to invest in the company.
Price earnings ratio: Market price per share/ Earnings per share
Price earnings ratio
Price earnings ratio is very low for this organisation compared to the other banking organisations in London. From the above table it has been found that the ratio has been increased to 0.43 in 2015 than the other two financial years.
Return on Equity: Profit after tax/ Equity shareholders fund* 100
Profit after tax
Equity shareholders fund
Return on equity
From the above table of analysis the profit after tax has been decreased to 988 in 2015 that lead to decrease the ratio of Return on equity effectively and efficiently. For this reason the financial preference of the company has also decreased.
Dividends coverage ratio: Profit after tax/ Dividend paid
Dividends coverage ratio
Dividend coverage ratio is the ratio from which the company can understand the ability of the company to pay divided to shareholders out of the net income. From the above table it can be concluded that as the company failed to pay to the shareholders the ratio is in negative terms.
Cash flow statement analysis of an organisation should have to be done in order to analyse the cash flow from investing activities, cash flow from operating activities and cash flow from the financing activities which will lead to evaluate the financial performance effectively and efficiently. From the cash flow statement analysis of Barclays plc, it can be understood by measuring the statement that in which segment the expenses have been made and from which activities the company can make profit appropriately. In this regard the analysis of the cash flow statement can be done by evaluating the statement.
Cash flow from operating activities has been increased in the financial year 2015 to $ 23771000 t as compared to 2013 and 2014. The company have improved their performance that reflecting in the Operating activities and it can be said the company’s current assets has increased.
Total cash flow investing activities has been declined with high level and become negative in 2015 as $ 12431000 from which it can be concluded that Investment in assets such as fixed assets have been decreased as per the cash flow statement.
Cash flow from financing activities has also been declined in 2015 from 2013 and 2014 effectively but in 2015 the amount is higher than in 2014 from the cash flow financial statement that is -$ 650000. As a result the changes in cash and cash equivalent have been increased effectively with a very higher level to $ 11905000 that will lead to understand the company’s high financial performance in this financial year.
Financial statement analysis of Barclays plc are evaluated by interpreting the Cash flow statement, Balance sheet and Income statement to measure the financial performance and financial position of the company for the financial years appropriately. From the above calculations and interpretation of financial statements strengths and weaknesses of the company are described as follows-
Strengths: In 2015 the company has enough current assets in order to meet their short term and long term obligations and it has been found that the company’s current ratio is 2.92:1 that is above appropriate ratio which is considered as a strong point of the company. The quick ratio is also higher than its appropriate level mentioned in the accounting rules and legislations effectively. According to the efficiency ratio the level of assets turnover ratio is lower but it has been continued to increase year to year. From the measurement and interpretation of efficiency ratio it has been concluded that the company’s assets and financial sources are utilised in proper manner in order to increase performance level and financial position in the economy.
Weakness: Weakness of the company can be analysed from the ratio analysis and by comparing them with other financial years effectively and efficiently. Profitability ratios of the financial years is so weak as net profit ratios are decreasing from the previous years as net profit is declining. Ratio of ROCE has also deceased that it will lead to lower performance level and profitability of the company.
Financial statement analysis is considered as a process and accounting technique of evaluating the performance level of an organisation by reviewing and interpreting accounting and annual reports effectively and appropriately by following accounting rules and regulations for evaluating projected performance of the company that can lead to help in order to make decisions. In this regard ratio analysis is the important technique for evaluating strengths and weakness of the company in a proper manner by efficiency, Profitability, investment, liquidity ratios and profitability positions of the companies in an appropriate manner. In this regard analysis of cash flow statement should have to be done in order to measure the investing, financing and operating activities to evaluate efficiency level of the company.
Recommendations can be concluded by evaluating the financial performance and position of the Barclays plc that the company should have to provide quality and standardised services including investment banking, corporate banking, wealth management and other financial services as per the customer requirements in order to increase the profitability positions of the company. The company’s holding is so high as compared to the sales level. Therefore it is recommended to the financial manager and business analyst of the company to increase sales management team should have to find investors and shareholders for more financial services effectively. Barclay’s directors should have to take financial decisions in order to pay proper amount of dividend to the investors and shareholders according to the expectations that they can sustain them for the next year.
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1) Calculation for current ratio = Current assets/ Current liabilities
2012 = 552393/ 1427364 = 0.39
2) Calculation for Quick ratio = Quick assets/ Quick liabilities
= Current assets- Stock - Prepaid expenses/ Current liabilities - Bank overdraft
2012 = 552393 / 1427364 = 0.39
3) Calculation for Working capital ratio = Current assets - Current liabilities
2012 = 552393 – 1427364 = -874971
4) Calculation for Assets Turnover Ratio = Turnover/ Total assets
2012 = 25609/ 1490321 = 0.017 times
5) Calculation for Debtor’s turnover ratio = Turnover / Debtors + Bills receivable
2012 = 25609 / 4365 = 5.87 times
6) Calculation for Creditors Turnover ratio= Turnover/ Creditors
2012 = 25609/ 3107 = 8.24 times
7) Calculation for Capital Gearing ratio= Common stock holders Equity/ Interest bearing bonds
2012 = 59986/ N/A = N/A
8) Calculation for Interest coverage ratio = Earnings before Interest and Taxes (EBIT)/ Interest expenses
2012 = 6570 / N/A = N/A
9) Calculation for Gross profit ratio = Gross profit/ Sales* 100
2012 = Nil/25609 *100 = 0
10) Calculation for Return on Capital employed = EBIT/ Capital employed* 100
2012 = 6570/ 59986 *100 = 10.95%
11) Calculation for Net profit ratio= Net profit/ Sales*100
2012 = 1810/25609*100 =7.07%
12) Calculation for Return on Assets = Profit After tax/ Total assets *100
2012 = 1810/ 1490321 *100 = 0.12%
13) Calculation for EPS: Earnings available to Equity shareholders/ Number of shares
2012 = 1810/ 169 = $10.71
14) Calculation for Dividend payout ratio: Dividend per share/ Earnings per share * 100
2012 = 6.50/ -5.30 = -1.22
15) Calculation for Dividend yield ratio: Dividend per share/ Market price per share *100
2012 = 6.50/ 38.43 = 0.169
16) Calculation for Price earnings ratio: Market price per share/ Earnings per share
2012 = 38.43/ -5.30 = -7.25
17) Calculation for Return on Equity: Profit after tax/ Equity shareholders fund* 100
2012 = 1810/ 59986 *100 = 3.02%
18) Calculation for Dividends coverage ratio: Profit after tax/ Dividend paid
2012 = 1810/ N/A = Nil
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