Accouting Ratio
Liquidity
The current ratio and acid test ratio of A Ltd were 1.61:1 and 1.04:1 respectively. The corresponding ratios of B Ltd were 1.39:1 and 0.81:1 respectively. A Ltd was operating more efficient than B Ltd. It may be due to the lower level of cash and trade debtors and / or higher level of trade creditors in B Ltd. B Ltd was operating in poor liquidity position to meet its future current liabilities.
Profitability
The gross profit margin and net profit margin of A Ltd were 51.7% and 21.8% respectively. The corresponding ratios of B Ltd were 58.1% and 26.5% respectively. B Ltd was operating more profitability then A Ltd. It may be due to the lower of cost of sales and / or the higher of profit margin setting in B Ltd.
The return on capital employed based on owners equity of A Ltd and B Ltd were 28.9% and 47.3% respectively. Once again, B Ltd was operating more efficient in using its capital.
Investment
The earnings per share of A Ltd and B Ltd were 33 cents per share and 66 cents per share respectively. The market price per ordinary share of A Ltd and B Ltd were $1.98 and $5.81 respectively. Therefore, the price / earnings ratio of B Ltd was higher than A Ltd.
B Ltd provided a higher dividends payable per share to their shareholders. The dividend cover of A Ltd and B Ltd reflected that the total actual amount dividend payable to shareholders of A Ltd was higher than B Ltd in relation to the net profit after taxation and preference dividends.
Furthermore, B Ltd was operating in a higher level of gearing level than A Ltd.