Gearing ratio long termloans preference shares

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Gearing ratio = Long termloans + Preference shares Ordinary sharecapital + Reserve + Preferenceshares + Long termliabilities × 100 RM 86821 RM ( 476013 + 118972 ) × 100 ¿ RM 86821 RM 594985 × 100 = 14.59 RM 79167 RM ( 107089 + 1833599 ) × 100 ¿ RM 79167 RM 1940688 × 100 = 4.08
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iv) Based on the ratios calculated above, comment on the performance of each company and recommend to your client which one is the best company to invest in. v) RATIO THE STORE AEON COMMENT Profitability Ratios Gross Profit Percentage 21.12% 36.02% The Store has generated RM0.21 of gross profit for every Ringgit in sales while Aeon Company has generated RM0.36 of gross profit for every Ringgit in sales. This shows that Aeon Company earns more gross profit than The Store. Net profit Percentage 0.78% 3.43% The Store has generated RM0.21 of net profit for every Ringgit in sales while Aeon Company has generated RM0.36 of net profit for every Ringgit in sales. This shows that Aeon Company earns more net profit than The Store. Return on Capital Employed 5.28% 12.64% Return on capital employed of The Store is 5.28% while that of Aeon Company is 12.64%. Aeon Company’s performance is better than The Store in term of returns from capital employed. Based on the profitability ratios, it was clear that Aeon Company is performed well in generating profit compared to The Store as both of the gross profit percentage and net profit percentage are higher. Besides, Aeon Company is also more efficient in generating profits from its capital employed than The Store.
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RATIO THE STORE AEON COMMENT Liquidity Ratios Current Ratio 1.17:1 0.45:1 The Store has RM1.17 of current assets to pay every ringgit of its current liabilities whereby Aeon Company has RM0.15 of current assets to pay every ringgit of its current liabilities. This shows that The Store has better amount of current assets to pay its short term obligations. Quick Ratio/Acid Test Ratio 0.56:1 0.17:1 The Store has only 0.56 times quick assets while Aeon Company has 0.17 times quick assets. This shows that many stock are piled up in the Aeon Company. According to the liquidity ratios, The Store has better performance compared to Aeon Company in both current ratio and quick ratio. So, The Store has higher ability to pay off its current liabilities with its current assets.
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RATIO THE STORE AEON COMMENT Efficiency Ratios Stock Turnover 5.18 times 4.48 times The stock turnover in both companies are almost the same. This shows that both companies order the stock regularly in that year and maybe due to high product demand. Creditor/Purchases Ratio 92 days 107 days The Store takes 92 days to settle its debts with supplier whereby Aeon Company takes 107 days to settle its debts. This shows that Aeon Company has less efficiency in paying its debt. Based on the efficiency ratios, it showed that The Store Company has better performance than Aeon Company. The store has more efficiency than Aeon Company in paying to its creditors. Also, the store replaced its stock faster than Aeon Company.
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RATIO THE STORE AEON COMMENT Shareholder’s Ratios Earnings per Share Ratio RM0.19 RM0.09 The Store earned RM0.19 in 2015 for every ordinary shares issued while Aeon Company earned RM0.09 in 2015 for every ordinary shares issued. This shows that The Store has higher earnings for each share.
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