The paper "Financial Analysis of Ramelius Resources Limited and Doray Minerals Limited" is a great example of a finance and accounting assignment. The focus of this paper is to conduct a financial analysis of two companies Doray Mineral Limited and Ramelius Resources Limited in the period between 2015 and 2016. In doing so, the report focuses on conducting both horizontal and vertical analysis as well as ratio analysis. The major assumption in formulating this report rests with the fact that the analysis will only cover a two-year period to establish the overall performance of the company.
It is also assumed that these companies operate within a similar sector and sub-sector and possess almost a similar model of operations. Question 1 (maximum of 700 words) Profitability Ratio Analysis The return on equity of the two companies is both positive. Doray’ s and Ramelius ratio values are 10.4% and 24.3%; ROA is also positive at 6.86 and 15.6%; gross profit margin of 24.6% and 18.9%; profit margin of 12.6% and 15.8%; and cash flow to sales ratio of 46% and 37.7% in the period ending 2016. In overall, the both of the companies have ensured to maintain positive returns over this period meaning that the level of profits generated from each asset and equity invested within the period has remained relatively stable and positive.
The degree of both gross profit and profit margins have also been positive over the year, which is an indication that the two companies have devised effective ways of marketing their products to the potential and existing customers (Penman & Penman, 2007). It is assumed that the mineral prices have been priced using a premium strategy thereby prompting a great deal of sales revenues that translates to enough profits over the period.
It is important to note that the profitability of these two companies can also be attributed to the lower costs of production as a result of the adoption of effective and fairly-advanced technological processes, which has the capacity of increase the overall gross profit that can later be translated to profits as a whole.
Birt J, Chalmers K, Maloney S, Brooks A & Oliver J 2016, Accounting: Business Reporting for Decision Making, 6th Edn, Wiley, Milton, Queensland.
Chordia, T., Roll, R. & Subrahmanyam, A., 2008. Liquidity and market efficiency. Journal of Financial Economics, 87(2), pp.249-268.
Frank, M.Z. & Goyal, V.K., 2009. Capital structure decisions: which factors are reliably important? Financial Management, 38(1), pp.1-37
Kumbirai, M. & Webb, R., 2010. A financial ratio analysis of commercial bank performance in South Africa. African Review of Economics and Finance, 2(1), pp.30-53.
Penman, S.H. & Penman, S.H., 2007. Financial statement analysis and security valuation (p. 476). New York: McGraw-Hill.