Sample Essay

KBR’s financial situation can be understood by viewing some of the key financial ratios of the company. Sales have dropped by 9.22 % in the year ended 2007 as compared to the previous year. However gross profit has increased by around 50 % over the same period, indicating a greater decrease in Cost of Goods Sold, therefore KBR have been more efficient in their operations over the year 2007. This has resulted in an increase of around 80 % in the Net Profit and the Operating Expenses rose by only 19 % in the same period (See Appendix I).

Current ratio has risen from 1.31times to 1.55 times. This means that the liquidity of the company is improving and it is in a better position to manage its daily operations. Debt to equity ratio has decreased from 2.03 times to 1.30 times. This is evidence that the riskiness of the firm has decreased and it is taking a more stable stance in the wake of the financial scenario. Return on equity has increased from around 5 % to 9 % because of the increase in Net Profit over the year.

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