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Hi,
Just a quick question … The financial statements of companies chosen are presented in different currencies (Dinar and Riyals) … Do I need to translate the currencies?
See Forum ‘I really need help regarding ratios’ as this problem was raised there and I tried to address it in my answer of 9th May 2014. 🙂
@trephana I read your reply and have a further question. If the exchange rate is not fluctuation over the three years (10SAR/Dinar)…. Is it enough to just include the rate beside the income statement and balance sheet or translation in this case is required?
You need to comment on the relative performances of the two companies so if there were no realy significantl currency fluctuations then your task should be easier. You can compare GP ratio and net profit/ operating profit ratios as percentages so no translations are required for that and for turnover you could do side by side graphs/ charts for the absolute figures (again no translations required) and comment on the trends – and what has significantly affected the movements. Most importantly you need to think about any differences in their business environments – different countries have different regimes, tax policies and laws that may account for differences in performance.
So a good discussion of these when commenting in the financial analysis will link your PESTLE and business analyses to this. Just do a translation in your spreadsheet and use if and when necessary and mention this in your Limitations. 🙂
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