Wedding Boutique Financial Analysis

Topics: Balance sheet, Asset, Financial ratios Pages: 12 (3328 words) Published: April 16, 2012

1. List of Appendices

2. Executive Summary

3. Introduction

4. Analysis
4.1 Financial Performance
4.2 Credit Management
4.3 Increasing Earning Power
4.4 Inventory Management
4.5 Debt Management
4.6 Structuring Business to maximise profits

5. Conclusion/Recommendations

6. References

7. Appendix


1. Current Ratio Calculation (as at 31st August 2010)

2. Equity Ratio Calculation (July 2010 & August 2010)

3. Debt Ratio Calculation (July 2010 & August 2010)

4. Receivables Turnover Calculation (August 2010)

5. Average Collection Period Calculation (August 2010)

6. Inventory Turnover Calculation (July 2010)

7. Inventory Turnover Calculation (August 2010)

8. Return on Total Asset (as at 31st August 2010)

9. Profit Margin Calculation (July, August & YTD 2010)

10. Financial Statements & Session Reports

Wedding Bells Boutique is a small retail business, structured as a partnership with two partners specialising in the buying and selling of bridal gowns and accessories. This report provides an analysis and evaluation of the current and prospective financial performance, liquidity, credit management, earning power, inventory management, debt management and tax position of the business as at 31st August 2010. Methods of analysis include the manipulation of current, equity and debt ratios as well as other calculations including profit margins, return on total assets, accounts receivable turnover and inventory turnover. These calculations can be found in the appendices. Results of the analysed data show that the business has been able to produce a small profit over a two month period on very low turnover and is also exhibiting great short term liquidity. It is also free of any major debt. Of concern however is the rate of return on assets, rate of inventory turnover and the rate at which accounts receivables are collected, all of which are not performing well. Outlined below are areas of weakness that require immediate remedy: * Improve average collection period for accounts receivable by making payment terms much stricter, implement discount incentives for early payment on credit purchases and further discount for cash purchases, * Improving/increasing inventory turnover by marketing the business better and ensuring service standards are maximised to ensure business is being built up and a good reputation is forged. The key focus should be on improving the rate of return on assets and substantially increasing the small net profit and revenue that is currently being made. It is clear that the only way this can be achieved is by utilising idol assets such as the funds in the investment account. It is by reinvesting these funds that the business will substantially increase its current revenue stream, or build new revenue streams to compliment it. Investing into some of the following areas will help with this diversification: * Introducing a men’s wedding attire and accessories range, * Enter the hire market: men & women – any occasion such as school balls, * Dry Cleaning Service to the public,

* Link with other bridal services to pool resources and refer business to each other, * Website and social networking marketing to promote business, * Contact all Bridal Expo’s and Wedding Planning Publications for exposure. It must be pointed out that the analysis within this report has its limitations, which therefore restrict its scope. A far greater insight is required, allowing analysis of previous periods/years financial results, in addition to a sound understanding as to its budget forecasts. Only then would a thorough analysis of Wedding Bells Boutiques current situation and possible future be complete.

This report provides information based on the analysis of the monthly financial reports of “Wedding Bells Boutique”, which is...
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