Swot Analysis Of Basem

The ratio of return on equity shows how much profit is made by a company as compared to its capital. It shows the ability of a firm to generate profit from its shareholder investments. Return on equity is also an indicator how effective is the management at using equity for growth and operation.

For Talke, the trend of return on equity is consistent to net profit. This is due to the shareholder’s equity only increasing by the profit for the year for the period under consideration.

It is evident that Basem has been generating a much higher return for the capital invested by its shareholders. Apart from the higher profit for the year, Basem has been managing its financing requirements through working capital management. This means that they are

This ratio is used for many purposes, including measuring financing risk. A high ratio generally means that the company has been aggressive in financing its growth with debt. Such capital structure is likely to result in volatility in the earnings as a result of additional interest expense.

This can also said to be a measure of the gearing level of the company. The optimum level of gearing is different to specific business sectors. For example, capital intensive industries such as logistics tend to have a slightly higher long term debt/equity ratio while electronics manufacturing companies have a relatively lower ratio

The company had a debt equity ratio of 2.44 in FY 2011. The company kept its profits in retained earnings to increase its equity and thus its gearing level went down. They also made a repayment of about 5.5 million long term loan bank and this reduced the debt equity ratio to 1.82 in FY 2012.

In FY 2013, accounts payables, accrued expenses and other liabilities went up by 20 million. At the same time SR 5.6m loan was also repaid. This resulted in a slightly increase in the debt equity

Total assets turnover ratio can be impacted by the working capital management of a company; therefore sometimes fixed assets turnover ratio provides a better view.

Fixed Assets Turnover (Sales/Fixed Assets)

S.A. Talke Basem

Year 2011 2012 2013 2013

Sales 38,410 63,722 84,064 342,104

Fixed assets 39,618 36,650 36,231 13,586

Fixed assets turnover 0.97 1.74 2.32 25.18

Fixed assets turnover is used along with total assets turnover as it sees how companies utilize their long term assets. Although very similar to but total assets turnover, risk of manipulation of records is comparatively lesser here.

The trend shown here is consistent to the Total asset turnover. The Company has been effectively utilising its assets and the assets turnover ratio has been increasing consistently.

Basem, on the other hand, has been utilisation its assets much efficiently.

This is an indication that S.A. Talke has the capacity to significantly increase its business using the same asset