The Plimsoll Chart: What is it?

The Plimsoll Chart: What is it?

The Merchant Shipping Act of 1876 revolutionised the world of sailing. The Act introduced a safe loading-line for ships and stopped owners and captains who over-insured their vessels – essentially endangering the lives of the crew.

Crucially this line was painted on ships and was named after its founder, Samuel Plimsoll.

Now you may be wondering what the Act of 1876 has to do with financial and industry analysis.

However the principle and theory behind it is exactly the same. The Plimsoll Chart accurately demonstrates the financial well-being of a company.

To put it simply: if a Plimsoll Chart is demonstrating a high and rising line then the signs for that business are good. But if the graph, which is a little over 3cm high and wide, shows a falling and low line then the signs for that organisation are bad.

Indeed, the Plimsoll Chart is a quick and dependable method of assessing a company’s financial health without going into all the excruciating detail.

Since it was founded in 1987, Plimsoll has continually improved the graph to meet the performance of the busy manager who wants a quick and instant decision. The Plimsoll Chart can act as an accurate indicator of how the company has performed, how it is performing and plot how it will perform in the future.

Similarly, the Plimsoll Chart is located in the company’s one-page analysis. The one-page analysis is a thorough evaluation of the readily-made available accounts of a company and it is presented in a series of graphs.

Using the ratios of accountant John Robertson, the six charts on a Plimsoll analysis look at sales growth, trading stability, profitability, working capital, gearing and immediate liquidity.

And through these findings, the weighted outcome of the above graphs, excluding sales growth, results in the Plimsoll Chart.

To find out more about the Plimsoll Chart or indeed about the one-page analysis contact Chris Glancey on 01642 626419 begin_of_the_skype_highlighting            01642 626419      end_of_the_skype_highlighting or email c.glancey@plimsoll.co.uk