UK Ratios


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Hi,

Please can somebody help, I am studying at uni and need to analyze some ratios, I really do not understand what they mean!!!

ROCE ratio 2011 is 31% and in 2010 was -2.7% is that good or bad?

Trade receivables ratio has gone from 43.9 in 2010 to 32.7 in 2011 - does this mean customers are taking less to time to pay?? ie average of 32 days in 2011??

Trade payables ratio has gone from 142.6 in 2010 to 105.85 in 2011 - does this mean they are getting better at paying?? and comparing the 2 they are receiving payment before having to pay for materials etc??

I know this is pretty basic stuff but only been studying this for 5 weeks, whilst working full time! And any help will be appreciated!

Thanks in advance
 
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ROCE ratio is return on capital employed that calculate the earnings before interest and tax for each dollar funded from shareholder's equity and debts. This ratio should be higher than the loan interest. This ratio measure the ability of management to generate earnings capital employed (Equity + noncurent liability (loan)). Your Example shows that 2011 is higher than 2010, which is good indicator because in 2010 it shows the company may faced earnings reduction or increasing in borrowings that reduce the shareholder's earnings per share.

Trade receivables turnover ratio measures how efficiently management use their receivables, the higher receivables turnover, the shorter collection period (shorter time between sales and cash collection). Your example shows that receivables turnover in 2011 is lower than in 2010, it means that customers take 2.85 days more to be collected in comparison to 2010.

Trade payables turnover ratio measures how how many times company settle its trade creditors, the lower payable turnover, the longer payment period (longer time between purchases and cash payment). Your example shows that payables turnover in 2011 is lower than in 2010, it means that company take 0.89 days more to settle suppliers in comparison to 2010. :)

http://hamrconsult.yolasite.com/
 

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