Account Assignment 2

Topics: Balance sheet, Financial ratios, Financial ratio Pages: 5 (1521 words) Published: August 21, 2013
Major assignment report

8/5 2013

prepared by
Thuy Tran

Executive Summary

This report is providing an analysis and evaluation of the current and previous profitability, liquidity and financial stability of Elite Textile Importers Pty Ltd for the years 2010 – 2012, it also given the information about trend, horizontal and vertical analyses, it also provides all calculations about this business and all the calculation can be found in AFB assign calculation.the business is have trouble with funding growth, and debtor keep increasing for that 3 years period and a business has a relatively poor rate of return on asset.The current and quick ratio was decreased in 2012 to 5,02 times and 2,66 time but the business still be able to pay its debt, there is a problem with account receivable because the business still difficult to collect the money from debtor which caused the percentage still increasing and it hard for business to freeing inventory The business is considered good, because low amount of debt, the increasing in time interest earned that help the business to pay off its interest and debt, the asset turnover is improved but still lower than the industry standard which mean a business is not work efficiency. The results show that the entire ratio is below the industry averages. In particular, the performance is poor in comparison to field profitability, liquidity, financial stability. The report finds out that the current position of the business is not positive. The recommendations for the business are, must improve the average collection period for debtor, and increase the inventory turnover, increase the asset turn over.

Contents

Executive Summaryi

Contentsii

Introduction1

Profitability2

Liquidity3

Financial Stability4

Conclusion5

Recommendation6

Reference List7

Introduction

This report provides information obtained through ratio analysis, related to the Profitability, liquidity and financial stability of Elite Textile Importers Pty Ltd for the years 2010 – 2012. This report will focus on the earning power, business’s ability, inventory management and debt management. However, this report will also show the strengths and weaknesses of Elite Textile Importers Pty Ltd. The reports will comment on the information of the company and give a recommendation that can improves Elite Textile Importers Pty Ltd.

Profitability

This report show the trend of Elite Textile Pty Ltd is moved upward, it means that company have a high profit and it easy for company to trade with this trend. Horizontal analysis is the comparison of previous financial information, it show that the company have a excellent increased in the following years 2010- 2011 (60,8%) and a small increase from 2011 to 2012 (27,7%) in the Income Statement for the Profit. But the related balance sheet show the total asset also increase but not much which are 8,6% in 2010-1011 and 7,9% in 2011 – 2012, however the total liability is also increases 8,2% in 2010-2011 and 10,1% in 2011- 2012, it mean the company have trouble with funding growth. Vertical analysis is an analysis of the ratio of financial statements in which each item in the financial statements are listed as a percentage of other items. According to the income statement, the companies have a good performance as the COS and Expenses is decreased by 41,3% to 36,7% and 40,8% to 34,6% in the following years 2010- 2012.However, the balance sheet show that we have in trouble with decreased in cash and increased in debtor. According to the excel report, we can see that the price earnings ratio is 4,8 times which mean the ordinary shares of business to be selling for 4,81 current profits in 2012.This show that the company is more stable as the price earnings ratio is low to the avenger about (19%). However, the dividend keep increasing from 645,000 to 1,415,000 during 2010-2012 and the high dividend payout (75% -80,1%) which show that...
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