Report of 707isolated island landscape design company

Introduction
707isolated Island is a small and rapidly growing landscape design company provides contract service to a variety of customers. The employees are paid fortnightly, based on an annual salary. The income of July 2010 to June 2011 is $235,825.63, during the same period, total expense is $155,428.63, net profit is $80322. And we use different ratios to analyse the performance of this company during the July 2010 to June 2011.

Performance ratios
When measuring the profitability of 707isolated island Ltd, there are 3 ratios should be calculated: (From July2010 to June 2011)

Return on equity
=Net profit after tax/ Shareholder’s equity
=$80,322/$128,471.00=62.52%
The return on equity measures the rate of return on ownership’s equity of the common stock owners. Shareholder has earned a return of $62.52 cents profit for every $1 when invested in the company which means the return is quite good. Return on assets
=Net profit before tax and interest/Total assets
= ($80,322+$75)/$155,110.55=51.83%
The return on assets (ROA) measures the firm’s capability to convert its resources into profit. Return on assets. The ROA ratio of the company is 51.83%. It means by using the available assets for generating profits, the company has earned a return of 51.83 cents profit before tax and interest for every $1 of assets available.

Profit margin
=Net profit before tax/sales
=$80,322/$235,825.63=34.06%
Profit margin reflects how much we earn from the sale. From the number, we know the company generated34.06 cents profit before tax for every $1 of sales.

Activity ratios
When measuring how effectively the company using its assets and how quickly it collect money from its customer, we calculated these two ratio.
Total asset turnover
=sales / total assets
=$235,825.63/$155,110.55
=1.52 times