Financial analysis - Essay Example

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Despite the company enjoying long periods of profitability and excellent performance in most of its activities, currently it has experienced a profit drop. Since this is not…
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Financial analysis
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"Financial analysis"

Download file to see previous pages First, it would be reasonable to determine the absolute changes that occurred between different items of the financial statements. The percentage changes can then be computed to facilitate comparisons between the changes that occurred in the items of the financial statement. Comparisons of different items and financial ratios can also be determined to identify areas that have problems and might have caused a decrease in profit. The financial ratios will aid in determining the managements efficiency (Brigham and Houston, 2004).
This section will entail performing several calculations to get the absolute changes, percentage changes, comparison changes, and financial ratios of different items in the financial statements. The changes will then be explained according to financial, industrial, and economic angles to try to explain the reasons behind the changes. Later in the section, various recommendations and suggestions will be made to the management in a bid to improve the financial situation of the company.
The company’s revenue had a drop of 39440000 sterling pounds, resulting to a 15.46% decrease in sales. This shows that the company’s current performance was quite low from the previous year’s performance. Deeper scrutiny in this issue at hand revealed that there was a drop in the average industrial revenue of the clothing sector. This was mainly because of the economic conditions that prevail currently. The economy is currently at a recession making consumers to substitute purchasing clothes from luxury brands such those Excellent Clothing Company produce. The company is also faced with intense competition from the new entrants in the industry. The competition reduces the market share of the company resulting to a significant reduction of revenue (Retail-excellence.com).
The company’s cost of goods has also had a drop 12300000 sterling pounds, resulting to a 12.71% fall in cost of revenue. This fall is due ...Download file to see next pagesRead More
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