Accounting and Financial Management at Fantastic Holdings Limited - Assignment Example

Ratio analysis is done to compare the performance of FHL with its major competitor, Harvey Norman. Profitability, Asset Efficiency, Liquidity, Capital structure, and Market performance ratios are calculated for both the companies and performance of the two companies is analyzed in the light of these ratios. Some of the limitations of the analysis are identified, conclusions are drawn and recommendations are given on the basis of the analysis done on FHL.Financial statement analysis involves evaluating three characteristics: profitability, liquidity, and solvency.

A short term lender will be interested in the liquidity of the company which measures the efficiency of the companies to pay their obligations when they are due. A long term creditor would assess the profitability and solvency of the company which measures the long term standing of the company. Hence financial statement analysis is extremely important for the company as well as for the users of the financial statements. Comparisons can be made on the intracompany basis, industry averages, and intercompany basis.

Vertical analysis is done to make intracompany comparisons and ratio analysis is done to make intercompany comparisons. In this report, both comparisons are made. An intracompany analysis is done using vertical and trend analysis and intercompany analysis is done through ratio analysis of Fantastic Holdings Ltd and Harvey Norman Holdings Ltd. Through the analysis, conclusions will be drawn regarding the performance of FHL from 2007 to 2009.The analysis is interpreted on the basis of this interpretation; the company makes adjustments and improvements to improve its performance.

Trend Analysis provides information about whether the firm’s financial position is more likely to improve or deteriorate in the future. (Besley and Brigham 2000).