Financial Performance of Stone Limited Company - Case Study Example

Name of the student: Course Tittle: Name of the professor: Date Financial performance of Stone Limited Company for the year end Stone limited company has performed considerably average in the market. It has a brighter future and a lot of room for improvement as can be seen in the following report. Because the company intends to borrow loan from the bank, it is important to analyse the company decisions. January Legal contract will help in in creating good business relationship Market research will help the company to know its market position New website will help in marketing the company product Training of employees will increase the expertise in product development financial reports will be in order for reporting and analysis February Designing of the product of the company will help defining mission and vision of the company Communication skills and finance course will help in improving marketing and financial management skills of employees March The improvement of the company working tools and software’s will help in improving the production efficiency of the company Directory advert for twelve months will help in improving sales of the company April Inquiry line of business had not start picking but with time it will slowly and reach boom Ease stress levels by hiring either full time employees or part time will help in maximizing production and service delivery Enhancing advertising level will help in increasing sales May customer research will help in knowing customer needs and preferences hence the business will be able to tailor their products and services in line with the needs and customer preferences Reducing stress among employees will help in increasing employee productivity June Renting of the room within the spark exhibition is a good business decision as it will help increasing sales through increasing customer base and customer awareness about the company product and services. the result of the decision is increase in net profit July Arrange for costumer research, so customer satisfactory can be reached and will help in increasing sales and customer confidence in the company products Ease stress levels by hiring either full time employees or part time this will help in serving customer in time and increase efficiency though it might result to increase in wage bill August Have local business club to present company image among competitors and it will also help in advertising the company among its competitors and made it known. this is a very crucial decision in ensuring that the company have its own image among many market competitors. September Since the business is low and the current business activities can not sustain business growth, the alternative source of finance is able to bail out the company from the financial difficulties. October Since the business is low and the current business activities can not sustain business growth, the alternative source of finance is able to bail out the company from the financial difficulties it should know the actual amount of loan to be applied for. November Marketing promotions will help in advertising the company hence increasing sales which will help in sustaining the business December Marketing promotions will help in advertising the company hence increasing sales which will help in sustaining the business To the Bank Manager Following the low business activities for the past few months of the months, the business has not been making much profit as expected this is due to low trading activities in the sector and the business development stage which is in its initial stages. From the trading activities of the business, the sales graph shown below shows business potentiality in the future, in the first year of trading, sales has been continuously increasing throughout the year and this shows that business has a potentiality of increasing its business activities. the decisions of increasing the marketing and advertising activities will help in improving the company sales. for the past trading period, the gross profit of the company has been fluctuating up and down as shown in the table below; Accumulatively, the Gross profit margin will be; Gross margin = Gross profit Sales Cumulative Sales = $50,042 Accumulated Gross profit = 5,854 Gross profit Margin = 5854/50042 = 11.70% A figure of 11.70% is an indication of relatively a good profit from the company. Since this is only one point indication, we can conclude that the company is performing relatively well and the bank should consider advancing loan to them. The company sales estimate for the next six months may look as follows; From the graph, the company expects increase in sales for the next six months. This is done following the research market which the company has done in the first year of trading. The company has made loses in the past due to heavy investment in research in development and also investment in the machineries and other assets. The bank should have confidence in advancing loan to the company since the current ratio; Current ratio = Current assets Current liabilities = 4520/3870 = 1.168 Current ratio of less than 1 is a bad sign for the company’s survival, since it indicates that the company may not be able to meet its current liabilities. From the analysis, the current ratio is 1.168, though is above 1 mark, it shows that the company is performing quite well in terms of liability management hence the bank should advance them loan in order to boost their business activities. Debtor payment time – This is the average time taken by debtors to pay for their debts Debtor payment time = Period end debtors x 365 Sales = (300X365)/9150 = 12 days With the debtor’s payment time of only 12 days, this shows that the company has strong credit policy which allows the company to collect cash faster and within a short time. Creditor payment time - the Creditor payment time gives us how number of days taken before payments are made to creditors Creditor payment time = Period end short term creditors x 365 Cost of sales = (400X365)7560 = 19.31 days Credit payment is higher that debtor’s payment period hence this is a good policy for the company. we kindly request you to advance for us with a lone which will enables us to roll out the company plan since we will be in a position to return it as our company is well managed in times of asset and liability management as shown in the calculation above. Part two: personal reflective report Team work experience is enjoyable though it is full of challenges. The groups members fully participated and contributed towards the report write up. Within the group, each and every member of the group was given role to play and I was assigned to work on the analysis report on the month of April and May while the other members worked on the other months. We gave ourselves two days to complete the work and the third day we compiled the last report. It was a wonderful experience as group members were able to explain some parts of the assignment and by the end of discussion; I had learnt a lot which I was not able to do in class. Though with much success, challenges were also there as the group members spent a lot of time storing and arguing in obvious points which would be incorporated directly in the report. This made us to spent more than necessary requirement time. In order for a group or team work to succeed, then there is need for team spirit in each and every group member. There should be a strong group leader who has the personality and ability to manage other group members. The members should have a common goal, vision and objectives as this will enable them to work towards achieving the same goal. Lastly there must be understanding between group members. Group dynamics concept is very important for every group members; the group should have a group diary where group activities are recorded. It should contain rules and regulation which guides the groups activities Read More