According to J,R Dyson (2004) there are 4 types of ratios when constructing a ratio analysis. They are; positivity ratios, Liquidity ratios, effieiciny ratios and investment ratios.
Profitability ratios
Profitability ratios give an denotation of how networkable a firm is. J,R Dyson (2004) believes the best way of assessing returnsability is through the ratio known as Return on capital employed notwithstanding this ratio is not universally calculated in one specific way repayable to profit and capital being defined in some(prenominal) ways and therefore producing different ratios. The ratio measure the profit figures against investment made by the shareholders and therefore reveals how much profit is being made with the investment being taken into account. (Figure 1) Morrisons have fared well having made a 5.09% increase in ROCE from 2007 to 2009 whereas Tesco have seen a steady decline in their figures deteriorationing from 25.12% in 2007 to 22.73% in 2009. Sainsburys on the other fall out over the three year period have seen a slight decrease of 0.32% from 10.97% to 10.65%.
One such example is the perfect(a) profit moulding ratio, this ratio measures how much profit a firm has earned in relation to their respective sales.
(Figure 4) compares the GP margins of each supermarket over the period of three years; Morrisons recorded an increase of 1.21% from 5.10% to 6.31% from the years 2007 to 2008 however, in 2009 GP margin fell to 6.28%. Although sales increase, represent of sales also increased at a high rate and therefore bring down the margin. Tesco saw a fall from 8.12% in 2007 to 7.67% in 2008 however in 2009 Tesco recorded a rise of 0.09% to 7.76%. Sainsburys on the other hand saw a substantial fall from their 2007 figure of 6.83% to their 2008 margin of 5.62% this was due to the increase in cost of sales and turnover not improving in correlativity to this increase therefore reducing gross profit However, 2009s Margin did fall but at a slight dramatic rate of 0.14%.
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