The paper "Amec Plc and Carillion Plc" is an excellent example of a math problem on finance and accounting. Amec Foster Wheeler is a consultancy, engineering and project management corporation set up fifty years ago with a wide global presence, managing oil, gas, minerals and metals exploration as well as energy generation and infrastructure development. The company has over forty thousand employees and had a turnover of close to four billion pounds and a net income of over one hundred and seventy million pounds (Amec, 2013, 4). Carillion Public Limited Company is a global facilities management and construction services firm established in 1999 with its headquarters in Wolverhampton in the UK.
The firm has about 40,000 employees, a turnover of just over four billion and net income of one hundred million pounds in the last financial year (Carillion, 2013, 3). These two companies are quite similar in their operations with minimal differences emerging in various operational structures and venture. Consequently, this paper seeks to examine and compare their financial performance in the last trading year using the following financial ratios: i) Return on Capital EmployedROCE = Income prior to taxation and interst charges / Capital EployedAmec = 243,000,000 / 253,000,000 = 0.9604743083003953Carillion = 187,800,000 / 236,300,000 = 0.7947524333474397These figures indicate that Amec has a higher income per capital employed compared to Corillion. ii) GearingVarious ratios can be used to determine the gearing ratio of the companies.
These include: Debt to Equity Ratio = Total Debt / Total EquityAmec = 129,000,000 / 1,124,000,000 = 0.1147686832740214Carillion = 628,900,000 / 983,600,000 = 0.6393859292395283Equity Ratio = Equity / AssetsAmec = 1,124, 000,000 / 2,384,000,000 = 0.4714765100671141Carillion = 983,600,000 / 3,639,900,000 = 0.2702272040440671Debt Ratio = Total Debt / Total AssetsAmec = 129,000,000 / 2,384,000,000 = 0.0541107382550336Carillion = 628,900,000 / 3,639,900,000 = 0.1727794719635155The gearing ratios indicate that Amec is a better place in terms of financial standing than Carillion.
The debt ratios for Carillion indicate that a lot of revenue and equity is required to service debt and in terms of dismal financial performance the company could operate unsustainably. iii) Liquidity RatiosCurrent Ratio = Current Assets / Current liabilitiesAmec = 1,224,000,000 / 1,004,000,000 = 1.219123505976096Carillion = 1,683,200,000 / 1,661,600,000 = 1.012999518536351Quick Ratio = (Cash & Cash Equivalent + Short term Investments + Accounts Receivable) / Current LiabilitiesAmec = 1,224,000,000 / 1,004,000,000 = 1.219123505976096Carillion = 1,683,200,000 / 1,661,600,000 = 1.012999518536351The liquidity ratios indicate that Amec is better placed to handle short term cash demands that may arise compared to Carillion whose liquidity ratios are lower. iv) Sales Per Capital EmployedSales Per Capital Employed = Sales / Capital EmployedAmec = 3,974,000,000 / 253,000,000 = 15.70750988142292Carillion = 4,080,900,000 / 236,300,000 = 17.26999576809141The sales per capital employed indicate higher figures for the Carillion PLC compared to Amex.