Financial Management and Control
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- Date Submitted: 11/10/2014 08:51 AM
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PGBM 01 FINANCIAL MANAGEMENT & CONTROL
Table of Contents
PART A 2
Report 2
APPENDIX 1: 4
PART B 9
[1] 9
[2] 11
PART C 14
[A] 14
[B] 17
Bibliography 18
PART A
[1]
Report
TO: The Board of Smithson Plc.
From: Financial analyst
Date: July, 2014
Subject: Financial Analysis
Introduction
This report is generated in order to evaluate and analyse the performance of Smithson in relation to profitability, liquidity, gearing and asset utilisation. Analysis will be done on basis of financial statements i.e. Income statement & Balance sheet of years 2012 & 2013. All the calculations of various ratios will be done in Appendix 1.
Evaluation of Performance
* In relation to Profitability:
One of the most important ratios to measure profitability of a company is return on capital employed as it shows how perfectly is the company using its capital for generation of returns. As per analyse, company has shown decline of ROCE by 70.9%. This decline indicates that company is not working up to the mark.
Gross profit ratio has declined from 58.4% in 2012 to 51% in 2013. This clearly shows that company is not able to generate maximum profit as it is having problem with its core production activities.
Net profit ratio has shown great decline of 68.25%. This shows that company couldn’t control its finance cost.
Operating profit ratio was 33.6% in 2012 but in 2013 it is merely 15.48%. Such decline indicates steep increase in operating expenses of the company.
Thus, in relation to profitability, company is not able to sustain its profitability as compared to last year, which shall deteriorate company’s goodwill and hold in market.
* In relation to Liquidity:
Current ratio being 1.29 in 2012 has now increased to 1.5 in 2013. This shows that company is able to maintain the standard of their current assets which at one point of time can generate cash liquidity i.e. it is able to maintain its liquidity. Increase in current ratio...
Table of Contents
PART A 2
Report 2
APPENDIX 1: 4
PART B 9
[1] 9
[2] 11
PART C 14
[A] 14
[B] 17
Bibliography 18
PART A
[1]
Report
TO: The Board of Smithson Plc.
From: Financial analyst
Date: July, 2014
Subject: Financial Analysis
Introduction
This report is generated in order to evaluate and analyse the performance of Smithson in relation to profitability, liquidity, gearing and asset utilisation. Analysis will be done on basis of financial statements i.e. Income statement & Balance sheet of years 2012 & 2013. All the calculations of various ratios will be done in Appendix 1.
Evaluation of Performance
* In relation to Profitability:
One of the most important ratios to measure profitability of a company is return on capital employed as it shows how perfectly is the company using its capital for generation of returns. As per analyse, company has shown decline of ROCE by 70.9%. This decline indicates that company is not working up to the mark.
Gross profit ratio has declined from 58.4% in 2012 to 51% in 2013. This clearly shows that company is not able to generate maximum profit as it is having problem with its core production activities.
Net profit ratio has shown great decline of 68.25%. This shows that company couldn’t control its finance cost.
Operating profit ratio was 33.6% in 2012 but in 2013 it is merely 15.48%. Such decline indicates steep increase in operating expenses of the company.
Thus, in relation to profitability, company is not able to sustain its profitability as compared to last year, which shall deteriorate company’s goodwill and hold in market.
* In relation to Liquidity:
Current ratio being 1.29 in 2012 has now increased to 1.5 in 2013. This shows that company is able to maintain the standard of their current assets which at one point of time can generate cash liquidity i.e. it is able to maintain its liquidity. Increase in current ratio...