Page 54 - Stakis Consolidated Teaching Note

consequent upon the Financial Services Act ensured that
the Finance Division would make no useful contribution to

profits. Despite the increased turnover in 1991, to £171.5

million, profits slumped from £30.6 million to £17.6
million.

When David Michels took office it was noticeable that the

primary area of attention was the reduction in margins.
This issue was tackled and the result was an almost

immediate rise in profits.

The following ratios will be used to analyse the financial
state and operating performance of the business for the

years 1991 and 1992.

Return on Capital Employed (ROCE)

Profit before Tax and Interest

1 :ROCE = __________________________________ X 100
Shareholder Equity + Long Term Loans

1991 1992

ROCE 17660 23976

_______ _________

302682 + 1433 255360 + 1124

= 5.81% = 9.35%