Ratio Calculation, Interpretation and Analysis

        The gearing ratio is a type of financial ratio that relate the company’s debts, funds, equity etc. Here are three years, 2016, 2017 and 2018 gearing ratio of the Premier Investments Limited is calculated. The gearing ratio for the year 2016 is 3.19. The gearing ratio for the year 2017 is 7.87. The gearing ratio for the year 2018 is 9.16.

Summary / Recommendations of Ratio Calculation, Interpretation and Analysis

        Financial ratio analysis of three-year performance indicate that Premier Investments Limited is managing its financial position efficiently. Company is mainly financing its operations from equity rather than debt and short-term loans. Therefore, liabilities are limited in these fiscal years. Moreover, current ratio greater than 1 indicate the strength of company in paying back its short-term obligations and liabilities. Somehow, net profit margin is less than 1. In the light of ratio analysis, an appropriate recommendation for Premier Investments Limited is to reduce their cost of operations to increase profit margin.