Based on the compassion with the industry average, the performance of both the companies is as follows:
The profit margin and ROTA of Midas are far behind from industry average. However, the company’s ROCE, operating multiplier and current gearing ratios are very well indicating the company’s better performance, efficiency and low risk. But, Midas has to improve its profit margin ratio and return on total assets ratio.
On the contrary, the profit margin and ROTA of Rock Fall are better than the industry average. However, the company’s ROCE, operating multiplier and current gearing ratios are less than that of industry average. Hence, the company has to improve the efficiency and performance to maximize the revenue.
The Du Pont system also reveals the following:
In almost all calculations, the left hand side is not equal to the right hand side of calculations for Midas. Whereas for Rock Fall has only slight differences in both sides. It can be analysed as follows:
As per the first and second formulae, Midas has to improve its operating margin. As per the last formula, it needs to improve its ROTA. Rock Fall has to improve its operating multiplier.