Interpretation of financial statements (report) Essay

Interpretation of financial statements (report) - Essay Example To keep an investment with a company or its shares is a decision that should be viewed by an owner or investor in terms of cost-benefit analysis just like any purchase transaction. The expected benefits must have to be quantified or measured in order to guide decision making better. A company is generally assumed to growth over time in certain finance models. (Brigham and Houston, 2002). It needs to have profitability, efficiency, liquidity and solvency to survive, grow and stay in business. It competitors would always be there to match every strategy that it unleashes; thus, the strategies to be used must consider its external and internal environment in order to compete well in an industry that is affected by many hard to control factors. External factors need not be avoided however, since companies have employ strategies that would help the to develop strategies that would help them cope with the changing external environment. The return on capital employed (ROCE) of WBS Ltd. at for the last two years 2009 and averaged at about 17% as against the industry average of 20.3%. WBS Ltd. is obviously less profitable than ordinary competitors in the industry in both years. ROCE also declined to 12% in 2010from 22% in 2009. Such declined performance could not be an indication of some problem as it is still very high. Profitability was lower also compared with 2007 and 2008 ratios. See Appendix B. A more than 15% return on capital employed (ROCE) would definitely attract investors as it would mean that for every $100 the investors expect returns of about $15. This could be viewed as something high during normal times or when there is no recession. The present situation of the economy may be described as recovering. The fact the company is slight not doing better than the rest of the industry must convince owners to keep watch their profitability if not their investment with the company may