Basic Industries is a diversified multinational corporation with major shares in various Electrical related markets. Comparison with Industry Averages
1.Between the years 1985 & 1994, Sales has increased from 6213.6 to 13413.1. Thus an increase of 115.8%. Whereas during the same period Expenses have increased by 123%. Thus a reduction in margin.
a.It is defined as a ratio that indicates the efficiency and profitability of a company's capital investments. In other words how efficiently are long term funds of a company being used. b.In 1994 it was 11%. In 1993 12.1%. In 1985 12.98%. A higher dip between 1985 & 1994. This is primarily because the proportion of Capital Employed has increased more than the proportion of NPAT.
a.In 1994 1.34. 1993 1.28. 1985 1.81
b.This ratio has decreased w.r.t 1985. This clearly tells that the net current liabilities of the company have increased.
4. Debt Equity ratio - It tells that (94-.32, 93-.27, 85-.17) a high proportion of companies funds are through equity. Net Profit Margin (= Net Income/Sales)
1.NPM has reduced w.r.t. 1993 from 5.05% to 4.53% (a net decrease of .5211% ). 2.The proportionate increase in Sales (15.87%) is more than Net Income increase (3.78%). 3.Relatively less increase in Net Income can be explained by the Increasing Operating Costs. 4.Among the Operating Costs, the major increase is in Materials, supplies, services etc. It has shot up by 22.42% which is significantly higher than the increase in Sales (15.87%).
1.In 1985, the Dividend Payout Ratio was 60.91%. It was 46.73% in 1993. This shows that the company had fuelled it's growth by partly utilizing the increased retained earnings proportion. 2.However, in 1994, the Dividend Payout Ratio was 47.9% (an increase of 1.17% y-o-y) which does not give any indication of some future growth or expansion plans. Recommendations
1.There has been a decrease in...