CAPM and WACC
1. Calculation of ratios -
| Gross Profit Margin | Gross Profit | = | Net sales - Cost of sales | = | 10380 | = | 38% | |
| Net Sales | Net Sales | 27300 | ||||||
| Operting Profit Margin | Operating Profit | = | Gross Profit - Operating Expenses | = | 6060 | = | 22% | |
| Net Sales | Net Sales | 27300 | ||||||
| Return on Capital Employed | Net Income | = | Net Income | = | 3540 | = | 9% | |
| Capital Employed | Total Assets - Current Liabilities | 40200 | ||||||
| Trade Receivable Collection period | Days in a Year | = | 365 | = | 365 | = | 64.18 | Days |
| Account Receivable Turnover ratio | Net Credit Sales/ Average account receivable | 5.6875 | ||||||
| Inventory Turnover period | Cost of Goods Sold | = | Cost of Goods Sold | = | 16920 | = | 2.73 | |
| Average Inventory | (Opening Inventory + Closing Inventory)/2 | 6200 | ||||||
| Gearning (Debt/Debt Plus Equity) | Debt | = | Total debt | = | 5300 | = | 0.07 | |
| Debt + Equity | Total debt + Total Equity | 72640 |
2. Points of analysis -
a. Gross Margin of the company is 38% which is showing great margin of profit as compare to industry average.
b. Companies Operaing profit and net income is goo enough for the company to survive.
c. Companies return on capital employed by the company is 9% which shows return on the capital employed is lower. in which company needs to work on.
d. Company's Collection period is 64 days which means company's collection against the sales made by them takes 2 months to recover. Hence Genereal consistancy should take into consideration.
e. Inventory turnover is 2.73 as it is the time the inventory of the company sold during an accounting period. This needs to be higher as higher inventory turnover ratio indicate the more number of times inventory of the company got sold.
f. Grearning Ratio indicates how much debt is there with the company in ratio of debt and equity in combination. Lower the ratio indicates lower debt owned by the comany. Hence the ratio also indicates the company has low debt.
g. Companies liquidity position is very good.
h. As due to research and development of the previous year the company were into losses but in 2019 company has great profit and loq debt and good liquidity position.
CAP plc is a listed company that owns and operates a large number of farm projects throughout the world. A variety of crops are grown. The following is an extract from the statement of financial position of CAP plc at 30 September 2009. K million Ordinary