Finance for E-Business (Report) Essay Example | Topics and Well Written Essays - 2750 words

Finance for E-Business (Report) - Essay Example BT Group plc is listed on stock exchanges in London and New York.† (btplc.com). The group has four (4) principal lines of business: BT Global Services; Openreach, BT Retail and BT Wholesale. The principal activities of the group include: â€Å"networked IT services, local, national and international telecommunications services, and higher value broadband and internet products and services† (btplc.com).) The ratios below and an explanation as to their use will indicate to you why this particular company’s share may or may not be recommended. However, as you will find out, there are limitations to these ratios. Profitability ratios are usually calculated in order to perform vertical analysis or to compare one year with another. These ratios include net profit margin and gross profit margin. Figures are also taken from the balance sheet and used for the calculation of specific ratios to determine how well the fixed assets were utilised. These ratios are known as asset management ratios. These include asset turnover ratios and return on capital employed. Shareholder or investment ratios such as return on equity, earnings per share and price earnings ratio are some of the other ratios that are useful here. A number of these ratios will be used to assess the financial performance of BT group over the past three (3) years. â€Å"It is impossible to assess profits or profit growth properly without relating them to the amount of funds (capital) that were employed in making the profits. The most important profitability ratio is therefore return on capital employed (ROCE), which states the profit as a percentage of the amount of capital employed† (BPP 2009) The figures above show the return on capital employed for the past three (3) years.. ROCE fell sharply from 11.86% in 2008 to 1.5% in 2009. However it increased in 2010 to 11.63%. These