Accounting for business decision Assignment Example | Topics and Well Written Essays - 1000 words

Accounting for business decision - Assignment ExampleEvery investor is refer about the security of his wealth. An investment is made after considering a lot of factors such as assay and return on investments, the value of an asset or a company and other factors both inborn and external. Internal factors argon those over which a company has regulatory authority while external factors are those over which a company has no control. Ventura PLC proposes to invest in the CFT the evaluation of their proposal involves ascertaining the viability of CFT Company. Therefore, a proportion analysis on the company is imperative. Ventura PLC as an investor would be interested in the following earnings per share ratios, return ratios and gearing ratios (Kumar 2009, pp. 95-115).This ratio shows returns to the shareholders that every share held generates. The ratio is obtained by dividing a companys earnings after tax by the number of ordinary shares, within a financial period. Concerning CFT, in the year 2011, the companys EPS = (EAT/Shares) = (410,000/2,500,000) = $ 0.164 per share, whereas, in the year 2012, the Companys EPS = (547,000/2,500,000) = $ 0.219 per share. A time series analysis of the EPS between the two years indicates an increase in the EPS in 2012 due to an increase in the companys earnings after tax. The trend experienced is good news for investors since they stand a chance of earning higher returns in the future. Using this short analysis, Ventura plcs investment proposal is brave outed. The reason for the support is that the CFT Company promises a future increase in reward to investors (EPS) (Kumar 2009, pp. 95-115).Return on equity is obtained by dividing a companys earnings after tax by total shareholders equity (EAT/Equity). Concerning CFT, its ROE in 2011 and 2012 are calculated as (410,000/2650, 000) = 15.5% and (547,000/2,897,000) = 18.9% respectively. This ratio indicates the proportion of the net boodle attributed to shareholders equity. The rate of return