Report on feasibility for investment in the construction sector Essay

Report on feasibility for investment in the construction sector - Essay Example There are 5 basic groups of ratios that are generally used for business analysis. From these, we select 1-2 ratios from each group depending upon the information provided by each company, and subsequently assess each company depending on these selected ratios. The 5 basic ratio groups are explained below: Profitability Ratios: These are defined as the ratios that are used to measure the degree of success of a business concern in terms of determining factors such as liquidity, assets, return on investment etc. Ex-Group Operating Profit. Group operating profit: Leopold A. Bernstein (1999) defines the Group as a measure of a company's earning power from ongoing operations, equal to earnings before the deduction of interest payments and income taxes. Dividend per Share: Leopold A. Bernstein (1999) explains that Dividend per share is the payment designated by the board of directors to be distributed pro rata among the shares outstanding per shareholder. On preferred shares, it is generally a fixed amount. On common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or the directors determine to withhold earnings to invest in plant and equipment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit. Operating Profit: It is defined as the difference between the revenue or turnover and the costs incurred during operations ie. Total operating expenses. Turnover or turnover ratio: It simply is the amount of business done by a firm during a financial year. DETAILS OF THE STUDY For the study, some core financial ratios of each of the 5 companies were studied and tabulated as shown under: 1) Alfred Mcalpine Group operating profit has risen by 6% to 38.2m (highest so far) before exceptional charges, tax and goodwill amortization. But the profit after goodwill amortization and exceptional charge