This is a solution of unit-2 Financial Assignment Help   in which we discuss about  financial performance of the company.

Introduction 

William Hills which is a service firm in gambling industry and the financial performance of the company is very strong and the assessment of the financial elements is as attached in the indices. Based on the performance of the company from FY’07 to FY’10 (both year inclusive) following remarks can be made about the company:unit-2 Financial Assignment Help

Profitability ratios

  • Gross Margin: gross margin of the company is the ratio between the gross margin and the sales. The gross margin of the company is 25% in FY’10, 24% in FY’09, 28% in FY’08 and 30% in FY’07. Hence the company has maintained the gross margin ratio in constant range. Hence we can say the gross margin statistics are constant over the years and so the direct cost of the company is also constant through FY’07 to FY’10. The Gross margin of the company shows a constant ratio but the gross margins are not so high so as to make it a very profitable venture for the company.
  • Operating Margin: operating margin of the company is the ratio of operating income and sales of the company. Operating margin for the company has shown decreasing trend from year 2007 to year 2010. The Decrease in operating income is mainly due to the increasing expenses of the company.
  • Net Margin: net margin of the company is ratio between net profit and sales of the company. The net margin of the company as shown in table-I has shown very irregular trend as the net margin of the company in FY’07 was 17% which grew suddenly to 24% in FY’08 and then suddenly dropped down to 8% in FY’09 and again net margin gained the momentum and reached to 14% in FY’10.
  • ROA: return on asset of the company is the ration between (income + interest after tax) and total assets of the company. Hence it is one of the main factors in determining the profitability of the company and looking at the ROA it can be said that what returns are achieved based on the assets of the company. ROA for the William Hills are in lower range hence the company is achieving very less return on the total assets of the company. Though it contains large amount of assets but the income is not so high as compared to the assets of the company. SO the returns on the assets of the company are in low range. The ROA for the company was 3.86% in FY’10, 5.36% in FY’09, 1.31% in FY’08 and 4.17% in FY’07.
  • ROE: return on equity is another major in order to evaluate the return which company has achieved through the use of equity. The ROE is the ratio of net income of the company and its total equity employed into the business. Hence it finds out the gain which it has over equity put by the owner. The ROE of the company should be more than the normal interest rate so as to give the profitable venture for shareholders of the company.

ROE of the company has always been in very good ratio as the ROE was 18% in FY’10 and the previous trend for the ROE of the company was 10% in FY’09, 65% in FY’08 and 68% in FY’07. Hence company has maintained very high ROE for its shareholders so as to make it a profitable venture for the shareholders of the company.

Hence the profitability of the firm though is in the satisfactory range looking at the net margin, operating margin and ROE. But the major issue with the company is the high fluctuations it has in the profitability calculations of the firm. Also the profitability of the firm has been decreased from the past year profitability considerably.

Investment Ratios

In order to make the investments in any firm the following ratios of a company are to be looked at so as to judge the future potential of the company in order to pay the dividend and to provide the earnings per share given by the company. The Following ratios are important in order to make the investment in any company:

  • Earnings per share: earnings per share are the ratio which shows that what amount of income has been generated by each share of the company. Hence the EPS ratio is very important from the company point of view as more the EPS, the shareholders of the company would be interested in investing in the company share. Hence dividend and earnings per share are the two major criteria which investors look for.

The earnings per share of the William Hills can be given as shown in the table-II in the appendix. The EPS ratio for the company has decreased from FY’07 to FY’10 as the net income of the company has fall down and number of share issues by the company has increased rapidly. The EPS for the Williams Hills in FY’07 was 33.6, 31.8 in FY’08, 20.7 in FY’09 and 21.6 in FY’10. Hence the EPS has decreased in the past history of the company.

  • Dividend payout ratio: from the past few years company has paid very high amount of dividend to its shareholders and always become a profitable and lucrative venture for its investors but now as the profitability of the company is decreasing and company needs to have more amount of money for the expansion purpose so more and more amount of money is plough back in order to make it in reserve and surpluses for the company.

The dividend payout ratio for the company in FY’07 was 66% which increased to 77% in FY’08 hence company started giving most of his earnings to its shareholders. But in FY’09 the dividend payout of the company was just 12% since company was having major expansion plans and for that matter it has to plough back the income of the company. Hence dividend was just 12% also in FY’10 the dividend payout was 35%.

  • Price earnings ratio: price earnings ratio is the ratio between price of stock and earnings of the stocks. Price earnings ratio of the company justifies the prices of the stock in comparison to the earnings of the stock. The price earnings ratio of the company can be used as the comparative parameter for comparing various stocks. The price by earnings ratio for the William Hills initially was quiet high in FY’07 but slowly with time it went on decreasing and in FY’10 P/E ratio is just 8.

The price by earnings ratio of any stocks provides the evaluation about the price     of the stock, i.e. if some stock is overpriced or underpriced it can be found put in order to trace its future course of action.

Looking from the investment perspective the stock of the company looks a very attractive option as the company provides good dividend to share holders, price          to earnings ratio is also high and EPS for the stock is in satisfactory position.      Hence the stock is a very good investment option but the performance has been         degraded from the past performance in terms of the dividend payment, EPS and price to earnings ratio as well.

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