#MMBA 4
As part of the corporate financial accounting course at Lagos Business School, Group 4 looked at the last ten financial records from two companies, Olam and Livestock Feeds. Focusing on profitability ratios, investment ratios, gearing ratios, efficiency ratios, and liquidity ratios helped the research show how well the companies were doing financially. Olam is a major agribusiness that works from the seed to the store shelf and sells food and raw materials for industry to more than 16,200 customers all over the world. Livestock Feeds, on the other hand, is a Pfizer subsidiary that helps the Nigerian animal husbandry industry with health and nutrition goods. Even though they are different, both companies have a big effect on the agriculture business in Nigeria.
we used ratio analysis and we started with profitability ratios . Profitability ratios measure a company’s ability to generate profits from its operations. The most commonly used profitability ratios are Gross Profit Margin, Net Profit Margin, and Return on Equity (ROE). Gross profit margin is the percentage of sales that exceed the cost of goods sold. Net profit margin is the percentage of sales that exceed all expenses, including taxes. ROE measures how much profit a company generates for each dollar of shareholders’ equity. For the analysis , we considered only net profit margin and return on equity for both olam and livestock feed .
Investemnt ratios was also looked in to . Investment ratios are used to measure how effectively a company is using its resources to generate returns for its shareholders. The most commonly used investment ratios are Price to Earnings (P/E) ratio and Dividend Yield. The P/E ratio measures the price investors are willing to pay per dollar of earnings. Dividend yield is the percentage of the stock price that is returned to shareholders in the form of dividends.
The ability of a corporation to fulfil its financial commitments can be measured using gearing ratios. The Debt to Equity ratio and the Interest Coverage ratio are the types of gearing ratios that are utilized the vast majority of the time. The ratio of a firm’s debt to its equity indicates the proportion of debt to equity that the company carries. A company’s interest coverage ratio indicates the number of times that its earnings are sufficient to cover the company’s interest expenses. The gearing ratios for both companies were also looked in to.
Liquidity and efficiency ratios were also considered , these are essential for assessing a company’s ability to meet short-term obligations and utilize assets effectively to generate revenue. The two most widely used liquidity ratios are the current and quick ratios, while the inventory turnover ratio and asset turnover ratio are the most frequently used efficiency ratios. The current ratio determines if a company has adequate current assets to pay off its current liabilities, and the quick ratio assesses a company’s ability to use quick assets to pay off its current liabilities. The inventory turnover ratio indicates how many times a company’s inventory is sold and replaced over a specific period, and the asset turnover ratio measures how effectively a company is using its assets to generate revenue. These ratios are used by investors, creditors, and other stakeholders to make informed decisions and evaluate a company’s financial health. A more detailed account is given in the part two of this piece .
ABP and APB