Table of Contents
Trend Analysis, Interpretation and Recommendation
Interpretation: Sales revenue
Interpretation: Profit after tax
Horizontal Analysis, Interpretation and Recommendation
Vertical Analysis, Interpretation and Recommendation
Turnover (Sales) and Gross Profit Analysis
Operating Segment Analysis
Current Assets Analysis
Non – Current Assets Analysis
Liabilities and Equity analysis
Ratio Analysis, Interpretation and Recommendation
Capital structure ratios
Market performance ratios
Overall Analysis, Interpretation and Recommendation
Overall Analysis and Interpretation
9.1 Limitations of Trend Analysis
9.2 Limitations of Horizontal Analysis
9.3 Limitations of Vertical analysis
9.4 Limitations of Ratio Analysis
3 year trend analysis for the income statement for 2010, 2011 and 2013.
Horizontal analysis for the balance sheet for 2011 and 2012
Vertical analysis for the balance sheet for 2010, 2011 and 2012
Vertical analysis for the income statement for 2010, 2011 and 2012
Complete ratio analysis for the financial statement for 2010, 2011 and 2012
1. Executive Summary
The purpose of this report is to utilize financial analyses to explore the financial performance of Esprit Holdings Limited during 2010 to 2012. This report provides trend analysis, horizontal analysis, vertical analysis and ratio analysis to evaluate the company financial position and based on the findings to give various recommendations to the company. Finally, the report will also go through the limitations in the above analyses.
Due to the challenging operating environment and continually uprising raw materials and labor costs, the company had poor financial performance over 2010 to 2012. Store closure programs were implemented in Europe and Asia Pacific during these periods. Firstly, trend analysis indicates that the sales revenue, EBIT and profit after tax were drop year on year. Secondly, horizontal analysis and vertical analysis shows that the company had exceeding current and non-current assets by ineffective investment strategy. At the same time, vertical analysis also find out that the company’s turnover and gross profit declined year over year. Although capital structure ratios express that the company successfully maintained its net cash position and market performance ratios also show that the company had high P/E in 2012; however, different ratios show that the company was facing financial downturn over 2010 to 2012. There were downward trends among profitability ratios; besides, efficiency ratios show that inventory conversion period, debtor collection period and creditor repayment period both kept rising from 2010 to 2012; besides, liquidity ratios also show that the cash was unable to covert all short term payable and debts by its resources.
According to the above analyses, we find out that the declining profit was the main reason to make the company had poor performance in overall analyses; therefore, we suggest that the company may focus its target markets in Asia Pacific especially in China to gain opportunity to increase its sales revenue as Europe and U.S. are struggling in different financial issues; China is an economic superpower and has desirable economic growth; meanwhile, the company should...
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