Internal Analysis of Abacus International - Essay Example

?Internal Analysis of Abacus International Introduction Abacus Business Solutions (ABS) provides technology solutions and systems integration to the hospitality industry (Abacus, “About Abacus”). It offers credit cards, hand held computers, mobile payment, property management, enterprise applications, Oracle Applications, Oracle Tools and Technology, E-Commerce, Reporting and Data warehousing, operational, delivery solutions and management services. The company is known for selling world class point of sale (POS) systems under the brand Aloha. The company is headquartered in Clearwater, Florida. Aloha Point of Sale systems are manufactured by National Cash Register (NCR). These points of sale systems are used extensively by the hospitality and retail industries (Abacus, “About Abacus”). Financial Resources and Analysis The financial resource of a company is the money available to the company in the form of cash, cash equivalents, credit lines and liquid securities. An entrepreneur needs to have sufficient amount of cash to operate a business successfully. Analytical tools like ratio analysis determine the profitability and business risks of the company. The management of the company needs to analyze the company’s profitability, business risks and financial condition to take a decision related with the company (Abacus, “Management”). The company had generated sales of $12 million in the financial year 2011. The current ratio signifies the company’s ability to meet the short term obligations of the company and a current ratio between 1.5 and 3.0 signifies that the company is in a healthy condition (Brigham, and Houston 87). The current ratio of ABS is 0.77 and 1.12 in the financial year 2011 and 2012 respectively. The company’s ability to meet its short term liabilities was very poor in the year 2011, however the company’s current ratio strengthened in the year 2012. The liquid ratio of the company signifies the company’s ability to meet its current liabilities with liquid assets (Brigham, and Houston 88). The liquid ratio of the company is 0.56 and 0.86 respectively in the financial year 2011 and 2012 respectively. The liquid ratio of the company in both the years is quite weak. The debt to equity ratio indicates the part between the shareholder’s equity and debt which is used for financing a company’s assets. The debt to equity ratio was negative in the financial year 2011 and improved considerably in the financial year 2012. The cash ratio of a company determines the ability of the company to repay its short term liabilities in a short time. The cash ratio of the company should be equal to or below 1.00. The cash ratio of ABS is 0.22 and 0.64 in the financial year 2011 and 2012 respectively. The cash ratio of the company is stronger in the year 2012 which signifies that the company has the ability to repay its current liabilities immediately by using cash or cash equivalents (Gibson 246). The inventory turnover ratio indicates the effective use of the company’s inventory management practices (Andrew, and Gallagher 97). The inventory turnover ratio of the company is 17.16; a high inventory turnover ratio is unhealthy because they represent an investment with a rate of zero. The return of the shareholder’s equity indicates the profitability to the shareholders of the company after including the tax and other expenses. The return on equity ratio in the year 2011 was negative which indicates that the shareholders did not receive any profit in the same year. This was mainly due to the fact that the hospitality industry was not performing well during recession. At the present situation, the hospitality industry is earning meagre profits because the economy is recovering from recession. The return on equity ratio was 5.06 percent in the year 2012 which signifies that the company is yielding profits and may provide better returns to the shareholders in the future. The current ratio of the company has been rising and the acid test ratio is weak. A strong current ratio coupled with a weak acid test ratio indicates a likely problem for the inventories of ABS and the company has a high level of inventory (Schell, and Tyson 242). This also indicates that the cost of goods sold or selling and administrative costs may be too high. The company needs to devise an effective marketing strategy which can improve the current financial position of the company and the shareholders can earn profits in the future. Human Resources The human resources of a company are an integral part of the company as the skill and capability of the employees determine the effectiveness of the company. Proper training and expertise imparted to the employees sharpen the skill of employees. The adaptability of the employees determines the flexibility of the company and the loyalty of the employees determines the company’s ability to maintain its competitive advantage. A high employee retention rate of a company reflects that the company provides a congenial working atmosphere to the employees. ABS has been successful in retaining its existing employees. The employees of ABS have an ownership stake in the company. From the profits earned by the company, 40 cents of every dollar goes to the employee as their incentives (Abacus, “People”). The employees of ABS communicate with each other through the latest telecommunication technology. This initiative taken by the company has improved communication between the employers and employees and reduced the communication gap among the employees. Data and content sharing among employees of ABS is a common approach which has improved the knowledgebase of employees. The employee team of ABS are imparted with regular training to improve their knowledge base and keep them updated about the latest market trends in the hospitality industry (Abacus, “People”). The company conducts employee surveys at regular intervals to receive feedback from the employees (Abacus, “People”). This helps the management team to keep a regular check on the employee. A company with a dedicated group of employees can not only achieve their sales target but also improve the effectiveness of the company. The company provides the employees with the latest software technologies to reduce their workload and increase their efficiencies. The management team of ABS has always ensured that the human resources assets of the company are utilized effectively. Works Cited Abacus. "About Abacus." 2013. Web. 14 March. 2013. Abacus. "Management." 2013. Web. 14 March. 2013. Abacus. "People." 2013. Web. 14 March. 2013. Andrew, Joseph D. and Timothy J. Gallagher. Financial Management: Principles and Practice. Minnesota: Freeload Press, 2007. Print. Brigham, Eugene F. and Joel F. Houston. Fundamentals of Financial Management. London: Cengage Learning, 2009. Print. Gibson, Charles H. Financial Reporting and Analysis. London: Cengage Learning, 2012. Print. Schell, Jim, and Eric Tyson. Small Business for Dummies. New Jersey: John Wiley & Sons, 2011. Print. Read More