1. Block 5 Section 4 External Views Of Organizational Performance
Prepared by
Hanady Ali Osman

2. Financial Ratios (Pg.140 Atrill & Mc Laney)
Financial Ratios provide a quick and relatively simple means of examining the financial health of a business.
Although ratios can be easy to calculate they are very difficult to interpret.
H. A. Osman

3. Financial Ratios (Pg.141-142 Atrill & Mc Laney)
H. A. Osman

4. Financial Ratio Classification (Pg.141/42 Atrill & Mc Laney)
Profitability Ratios provide an insight to the degree of success in creating wealth. They express the profits made in relations to other key figures in the financial statements or to some business resource.
Efficiency Ratios also known as activity ratios measure the efficiency with which certain resources have been utilized within the business.
H. A. Osman

5. Financial Ratio Classification (Pg.142 Atrill & Mc Laney)
Liquidity Ratios examine the relationship between liquid resources held and creditors due for payment in the near future.
Gearing Ratios examine the relationship between the amount financed by the owners of the business and the amount contributed by outsiders showing risks associated with the business.
Investment Ratios assess the returns and performance of shares held in a particular business.
H. A. Osman

6. Financial Ratios (Pg.141-142 Atrill & Mc Laney)
ROSF
ROCE
Net profit margin
Gross profit margin
Average stock turnover period
Average settlement period for debtors
Average settlement period for creditors
Sales to capital employed
Sales per employee
Current Ratio
Acid Test Ratio
Operating cash flows to maturing obligations
Dividend per share
Dividend payout ratio
Dividend yield ratio
Earnings per share
Operating cash flow per share
Price/earning ratio (P/E)
Gearing ratio
Interest cover ratio
H. A. Osman

7. The need for comparison (Pg. 142-143 Atrill & Mc Laney)
Calculations of performance should be
compared with some benchmark that the
information can be interpreted and
evaluated:
Bases of comparison:
Past period
Planned performance
Similar businesses
H. A. Osman

8. Key steps in financial ratio analysis (Pg. 143-144 Atrill & Mc Laney)
Identify users and
Their information
needs
Calculate
Appropriate
ratios
Interpret and
Evaluate the
results
H. A. Osman

9. Profitability Ratios (pg. 146-147 Atrill & Mc Laney)
Return on Ordinary Shareholders’ funds (ROSF)
Represents the amount of profit available to the
owners.
Net profit after taxation & preference dividend (if any)
ROSF =
X 100%
Ordinary share capital plus reserves
H. A. Osman

10. Profitability Ratios (pg. 147-148 Atrill & Mc Laney)
Return on Capital Employed (ROCO)
Represents return to all suppliers of long-term
finance before any deductions for interest payable
to lenders of payments of dividends to
shareholders are made.
Net profit before interest and taxation
ROCE =
X 100%
Share capital +Reserves +Long-term loans
H. A. Osman

11. Profitability Ratios (pg. 148-149 Atrill & Mc Laney)
Net Profit Margin
Represents the profit from trading operations
before any costs of servicing long-term finance
are taken into account.
Net profit before interest & taxation
Net Profit margin =
X 100%
Sales
H. A. Osman

12. Profitability Ratios (pg. 149 Atrill & Mc Laney)
Gross Profit Margin
Represents the difference between sales and the
cost of sales. It measures the profitability in
buying (or producing ad selling goods before any
other expenses are taken into account.
Gross Profit
Gross Profit margin =
X 100%
Sales
H. A. Osman

13. Efficiency Ratios (pg. 150-151 Atrill & Mc Laney)
Average Stock turnover period
Measures the average period for which stocks are
being held. Preferable is a low stock turnover
period to a high period, as funds tied up in stocks
cannot be used for other purposes.
Average stock held
Stock turnover period =
X 365
Cost of Sales
H. A. Osman

14. Efficiency Ratios (pg. 151-152 Atrill & Mc Laney)
Average settlement period for debtors
Calculates how long, on average, credit customers
take to pay the amounts that they owe to the
business, as the speed of payment can have a
significant effect on the cash flow of the business.
Trade debtors
Average settlement period =
X 365
Credit Sales
H. A. Osman

15. Efficiency Ratios (pg. 152-153 Atrill & Mc Laney)
Average settlement period for creditors
Measures how long, on average, the business
takes to pay its trade creditors.
Trade creditors
Average settlement period =
X 365
Credit Purchases
H. A. Osman

16. Efficiency Ratios (pg. 153-154 Atrill & Mc Laney)
Sales to capital employed or Assets turnover ratio
Examines how effectively the assets of the
business are being employed in generating sales
revenue.
Sales to capital employed ratio =
Sales
Long-term capital employed (Shareholders’ funds + long-term loans)
H. A. Osman

17. Efficiency Ratios (pg. 154 Atrill & Mc Laney)
Sales per employed
Examines the productivity of the workforce.
Sales
Sales per employee =
Number of employees
H. A. Osman

18. Liquidity Ratios (pg. 156-157 Atrill & Mc Laney)
Current ratio
Examines the ability of the organization to cover
its current liabilities from its current assets.
Current assets
Current ratio =
Current liabilities
(creditors due within one year)
H. A. Osman

19. Liquidity Ratios (pg. 157-158 Atrill & Mc Laney)
Acid test ratio
Examines the ability of the organization to cover
its current liabilities from its current assets without
having to sell its stock i.e. excluding stock as it is
the least liquid acid. Best result at least 1.
Current assets (excluding stock)
Acid test ratio =
Current liabilities (creditors due within one year)
H. A. Osman

20. Liquidity Ratios (pg. 158-159 Atrill & Mc Laney)
Operating cash flows to maturing obligation ratio
It provides a further indication of the ability of the
business to meet its maturing obligation.
Operating cash flows =
Current liabilities
H. A. Osman

21. Gearing Ratios (pg. 161 Atrill & Mc Laney)
Measures the contribution of long-term lenders to
the long-term capital structure of a business.
Long-term liabilities
Gearing ratio
X 100% =
Share Capital + Reserves + long-term liabilities
H. A. Osman

22. Gearing Ratios (pg. 162-163 Atrill & Mc Laney)
Interest cover ratio
Measures the amount of profit available to cover
interest payable.
Profit before interest and taxation
Interest cover ratio =
Interest payable
H. A. Osman

23. Investment Ratios (pg. 164-165 Atrill & Mc Laney)
Dividend per share ratio
Indication of cash return that an investor receives
from holding shares in a company. Dividend per
Share can vary considerably between companies.
Dividends announced during the period
Dividend per share =
Number of shares in issue
H. A. Osman

24. Investment Ratios (pg. 165 Atrill & Mc Laney)
Dividend payout ratio
Measures the proportion of earnings that a
company pays out to shareholders in the form of
dividends.
Dividend payout ratio
Dividends announced for the year =
X 100%
Earnings for the year available for dividend
H. A. Osman

25. Investment Ratios (pg. 165-166 Atrill & Mc Laney)
Dividend yield ratio
Relates the cash return from a share to its current
market value.
Dividend yield ratio
Dividends per share / (1 – t) =
X 100%
Market value per share
H. A. Osman

26. Investment Ratios (pg. 167 Atrill & Mc Laney)
Earnings per share ratio
Relates the earnings generated by the company
during a period and available to shareholders to
the number of shares in issue.
Earnings available to ordinary shareholders
Earnings per share =
Number of ordinary shares in issue
H. A. Osman

27. Investment Ratios (pg. 167 Atrill & Mc Laney)
Operating cash flow per share ratio
Provides a better guide to the ability of a company
to pay dividends and to undertake planned
expenditures than the earnings figure.
Operating cash flows – preference dividends =
Number of ordinary shares in issue
H. A. Osman

28. Investment Ratios (pg. 168 Atrill & Mc Laney)
Price/earnings ratio (P/E)
Relates the market value of a share to the
earnings per share. The ratio is a measure of
Market confidence in the future of the company.
Market value per share
Price/earnings ratio =
Earnings per share
H. A. Osman

29. Limitations of ratio analysis (pg. 173-174 Atrill & Mc Laney)
Quality of financial statements.
The restricted vision of ratios.
The basis of competition
Balance sheet ratios.
H. A. Osman

30. Green Marketing Societal marketing approach (Pg. 261 Blythe)
Green marketing by Peattie (1992) is
defined as;
“The management process responsible for identifying, anticipating and satisfying the requirements of customers and society, in a profitable and sustainable way”
H. A. Osman

31. Green Marketing Societal marketing approach (Pg. 261 Blythe)
Determinants of orgal. environmental and
social impact;
its technology
its economic impact, and
its management style
H. A. Osman

32. Green Marketing Societal marketing approach (Pg. 261/2 Blythe)
Sources of pressures for reform:
Customers
Green pressure groups
Employees
Legislation
Media
Ethical investment
H. A. Osman

33. Green Marketing Societal marketing approach (Pg. 261/2 Blythe)
SCEPTICAL analysis: (marketing audit
tool to develop green marketing policies)
Social factors
Cultural factors
Economic factors
Physical environmental factors
Technological factors
International factors
Communications and infrastructure factors
Administration and institutional factors
Legal and political factors
H. A. Osman

34. Green Marketing Societal marketing approach (Pg. 263 Blythe)
Psychographic typologies of
customers in terms of greenness:
Activists
Realists
Complacent
Alienated
H. A. Osman

35. Marketing ethics (Pg. 263 Blythe)
Ethics are the principles that define
right & wrong and are divided into two:
Teleological : that acts should be defined as ethical or otherwise according to the outcomes of the acts
Deontological : that acts are defined as ethical or unethical regardless of the outcomes.
H. A. Osman

36. Marketing ethics (Pg. 264 Blythe)
Research shows that most business people separate sets of morals for work and for home.
Code of ethics should be developed and not left to chance in order to reduce conflict amongst the staff.
H. A. Osman

37. Marketing ethics (Pg. 264 Blythe)
Codes of ethics in an organization
should involve the following;
Products
Promotions
Prices
Distribution ethics
H. A. Osman