According to the reading of Pamela Peterson Drake financial analysis is the name given to the progression of selecting, evaluating and explaining to assist in investment and financial management. It is the process of assessing business in an attempt to plan and improve all financial details…
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The preparation of financial statement analysis requires financial ratios, accounting data from financial statements. The ratio assists in measuring strengths and weaknesses of the firm and allows trends and comparisons with other firms within the industry to be identified. It also covers the areas of liquidity, operating profits, financing and stockholders' return on investments (Collier, Grai, Haslitt, McGowan, 2004). In the condition given, Track Events Ltd. is owned by a local independent ticket agent who sells tickets for sporting events, and that is why he needs to analyse his financial accounts in order to determine boost in sales and to make sure that his business is not suffering from insolvency. Total revenue from commissions and profitability has varied widely over the last year. Revenue from commissions peaked over ?1,073,000 in 2010 and dropped to ?1,053,000 in 2011. This may be due to decrease in the demand for the tickets being sold. Assessing the profitability of Track Events Ltd. is very significant in order to determine future business plans. These profitability ratios indicate the increase in the profitability of current operations of the business. Operating profit margin helps to provide useful information for investors when examining the trend for determination of the company’s quality. It has risen from 9% in 2010 to 28% in 2011. This shows that the company’s management has succeeded in generating income from the business operations. This increase is due to revenues from commissions increasing faster than the expenses of the business. Furthermore, the net profit margin which shows the earning capacity of business has gradually increased over the year from 5% to 29%. This is a clear indication of the company being considered as more stable and profitable, after payment of all taxes and expenses. Possible reasons of this are the reduction in operating expenses and increase in sales. Return on Total Assets is a measure of net profit earned against the use of total assets. It has increased considerably from 2% to 14% over the year. This means that Track Events Ltd. is able to make use of its assets efficiently thereby increasing its profits. Decrease in the staff costs as a percentage of commissions earned from 62.5% to 48.7% informs that the company is able to keep more fraction of the commission after paying its staff costs as less staff costs per pound of commission earned is being paid. This drastic fall in salaries may either be due to reduction in salaries or laying off workers thereby increased productivity and reduced costs. Besides this, the evaluation in 2011 relative to the previous year concludes that the liquidity has increased, with the current ratio increasing over the year. This indicates that the position of the firm has improved and the firm is liquid enough to repay its debts. This significant increase may have been due to the increase in current assets by conversion of non-current assets into current assets, by borrowing or ploughing back profits. In addition, the decrease in current liabilities by paying off debts may also have caused this increase. The interest coverage of Track Events Ltd. has increased from 4% to 10%. This notifies that the debt burden of the company is lower and bankruptcy or default is less likely to be possible. This is due to the fact that this year Track Events made huge profits due to a radical increase in its incomes and a reduction in its expenses. Moreover, the
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(Financial Statement Analysis Report Assignment Example | Topics and Well Written Essays - 1000 Words)
“Financial Statement Analysis Report Assignment Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1390260-financial-statement-analysis-report.
3. a. Sales are projected to increase in coming years. 4. c. priced correctly 5. d. Company X has higher leverage than Company Y. 6. a. $129 7. a. 0.2 8. a. $ 416.25 9. b. 5.00% 10. a. 9.49% 11. c. 13.36% Problems 1. a. How and when should K2 account for their warranty?
Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life. The financial statement selected for the purpose of this part of this report is the Income Statement. The income statement shows the profit or loss incurred by a business entity over a period of one financial year (Wild, 2006).
The company was established in 1777 by Bass Williams with its headquarters based in Denham in UK. The International hotel group operates in hotel industry and offers hospitality services to its customers (Intercontinental Hotel Group, 2013). The company reported a net income of 460 million dollars as at 2011 and a net operating income of 1,768 million dollars in the same period (Intercontinental Hotel Group, 2013).
During that time the group has doubled its revenues, trebled its order book and increased its profits more than four times. During 2012, the order book rose by four per cent, underlying revenues increased by eight per cent and underlying profits grew by 24 per cent (ROLLS-ROYCE PLC, 2013, pg 43).
A ratio analysis has been conducted using various analytical tools, which are described in the paper. The paper contains a summary of quantitative analysis that include the balance sheet analysis, the analysis of the income statement, the cash flow analysis, the analysis of the operating efficiency, the analysis of ROE, credit and liquidity analysis and the growth expectation.
The brand of the company particularly targets 15 to 25 years old males and females covering mainly the U.S. and Canada and having retail stores hovering around 929 with an online store as well. Low-rise jeans,
nformation on a company’s assets, liabilities and owner’s equity whereas the statement of income provides information on a company’s revenue and expenses. By analyzing them management shall be aware of their company’s strengths, weakness and the limits of its resources
However, the balance sheet of Kellogg has remained very risky due to much higher amount of debt included in its capital structure. As per the ratio analysis, both firms have more or less performed on a similar footings and not much important discrepancy is found
Therefore, the information from the financial statement and ratios has been used to analyse the performance of the selected two companies with three other major competitors (i.e. Millennium & Copthorne Hotels Plc., Safestay and Minoan Group Plc.) in the respective industry.
The year 2007 also registers a higher return on equity. That may be an indication that in 2007, the company was in a better position to maximize resources to generate profits (Bragg, 2012).
Apart from the cash ratio, the liquidity ratios are
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