Definition:

“The ability of business to generate returns for owners.”

“ Overall effectiveness of the management”

Years Involved:
Current Year = 2010
Base year = 2009

Items Involved:

• Earnings before interest and tax (EBIT).

• Interest Cost.
• Fixed assets
• Total assets.
• Shareholder’s equity.
• Gross profit
• Net profit
• Cost of sales
• Sales
Analytical table:

Name of Current Base

Ratio Year Year Result Reason for Change
2010 2009
Gross Profit 16% 17.42% Unfavorable Gross Profit ↑23.13%
Margin Sales ↑ 34%
Operating 12.55% 13.70% UnFavorable Operating
Profit Margin Profit ↑ 22.75%
Net Profit 6.53% 8.16% UnFavorable Net Profit ↑ 6.63%
Margin
Operating 87.45 % 86% UnFavorable Operating Expenses
Ratio increase as24.54 % of sales

Critical Analysis:
The ability of the business to generate returns is unfavorable in current period as
compared to base period..

The major reason of this unfavorable profitability is that although the sale and
profitability are increasing in the current period,but the % increase in profit is less as
compare to sale in current period as sale is increasing by almost 34%,but G.P margin,
operating margin, net profit margin are increasing by 23.13%,22.75%,6.63% respectively.

. The burden of operating cost also unfavourable in current periodas cost increase
by 24.54% as compare to the base year 2009.). It means that increase in sales is not
highly profitable for Tri Pack Films Limited.
 Return Analysis

Name of Ratio Current Year Base Year Result Reason for

2010 2009 Change
Net Profit ↑ 6.63
ROA 11.24% 10.27% Favorable %
Net Profit6.63%
ROE 27.63% 29.07% UnFavorable ↑
Equity ↑12.21%

ROOA 50 % 37.22% Favorable EBIT ↑ 18.9%

Fixed assets
10.64% decrease
ROI 21.1% 17.28% UnFavorable Total assets 2.60
decrease

Critical Analysis
The overall effectiveness of management towards the use of financings has a mixed result
in current period 2010 as compared to base 2009. The expression of ROE > ROA > i
indicates that the debt financing is also favorable for Tri Pack Films Limited .
The large gap between ROOA and ROA is indicating that Tri Pack Films
Limited has more idle assets.

DuPont Analysis

DuPont of “ROA”:

Activity V\S Profitability

Total Asset Turnover × Net Profit

2010 1.73 × 6.53=11.30 fav

2009 1.25 × 8.16=10.2

The favorable ROA is contributed by the total asset turnover as it increase in current
period as compare to base year 2009. Although profitability is decreased in current
period.
DuPont of “ROE”:

Profitability V\S Activity V/S Solvency

Net Profit × Total Asset Turnover × Total assets / Equity

2010 6.53% × 1.73 × 2.46=27.63

2009 8.16% × 1.25 × 2.83=29.07

The RoE in unfavourable due to solvency and net profit margin ratios.

DuPont of “ROAA”

Operating profit Margin × Fixed asset Turnover ratio

2010 6.53 % (unFav) × 4.07 (Fav)

2009 8.16% × 2.71%

The favorable ROOA is contributed by the activity in 2010 as compared to base.

Although the profitability is decreased in current period 2010 as compare cto base period
2009.