This assignment is related to the manage the financial operations, which helps develop the financial management and monitor the financial procedures, financial performance of the business.
Sushi bar was established there years ago , it has the freshest and finest sushi , and the owners want to sell the business, and it’s aiming at top-end corporate clientele. I will look at the financial information and do the ratio analysis, then I will decide whether to buy the business, if it would be a good investment.
1. You are investigating whether to buy Sushi Bar. Discuss what sort of financial information you would be interested in and why it’s relevant.
There are many types of financial information would be concerned whether to buy the Sushi Bar:
Ratio analysis: It’s a tool used to evaluate the financial performance and position of a business, communicate financial performance that may not be apparent in P&L statement and balance sheet. It analyses Overall performance, Profitability, Turnover, Liquidity, Solvency and Leverage. It could provide me all the important warning indications of problems of Sushi Bar,
Income statement: Income statement provides the profit and loss information of the business, and it’s also called P&L statement. The income statement includes the information about the sales, Cost of goods, Gross profit, Labour cost, Overheads, and Net profit. It could show me whether the Sushi Bar made or lost money during the 3 years being reported.
Balance sheet: It’s a summary of an organization’s balances, it prefers to financial position or condition, reports on a company’s assets, liabilities and owner’s equity. It gives a point of business. It could set out the assets and liabilities to show me the net worth of the Sushi Bar.
Cash flow statement: It’s a financial statement that shows how change in balance sheet and income accounts affect cash. It’s useful in determining the short-term viability of a company, particularly its ability to pay bills. It could help me to see the Sushi Bar's cash flow activities, particularly its operating, investing and financing activities.
Retained earnings statement: It’s a basic financial statement that explains the changes in a company’s retained earnings over the reporting period. It breaks down changes affecting the account. It could show me the profit and loss of the Sushi Bar’s operations, and any other items charged or credited to retained earnings.
Those statements are more understandable and relevant, realizable and comparable. These financial information that related to the Sushi Bar could help to make a decision property.
2. You are required to do a comprehensive comparative ratio analysis for Sushi Bar and comment on the business in terms of overall performance, profitability, turnover, solvency and liquidity. Formulate your results into a table.
|Area of analysis |Name of the Ratio |Formula |2006 |2007 |2008 | | |Return on |Net profit after tax/|12000 / 100000 |9448 / 185392 |11300 / 284521 | | |investment |average owners |*100=12% |*100=5.12% |*100=3.97% | |Overall performance | |equity* 100 | | | | | |Return on total |Net profit before |30500 / 346000 |27357 / 294383 |29248 / 333927 | | |assets |interest and tax/ |*100=8.82% |*100=9.29% |*100=8.76% | | | |average total asset *| | | | | | |100 | | | | | |Gross profit ratio|Gross profit/...