Executive Summary: Maria Hernandez
This report is based on self-employed brand new business, started by Maria Hernandez on July 2, 2004. She named the company Maria Hernandez & Associates which elaborates Web-pages for business and people in general, this company is her first business venture. The purpose of this financial report is to analyze the profitability of the company and give an overview and explanation of the current financial situation.
Based on the financial statements Team 5 Auditing Firm has elaborated for her, it appears that the company, which is in year one of operations, required a great deal of investments its start-up. Even though Maria Hernandez & ...view middle of the document...
This overview is different than the perception Maria has of the success of her business and helps her understand the reason why the amount of cash in the bank is going down.
Team 5 Auditing Firm would state that the company is profitable and has a potential to grow if Miss Hernandez focuses on bringing more clients in that will maximize her revenues. However in order to keep the business running, she needs to address her liquidity problems. Especially the $7000 from a couple of web designing jobs she has not been paid for yet. This amount will certainly be a crucial in the upcoming monthly expenses especially the fixed salary expenses.
Furthermore when taking ratios into account Maria Hernandez and Associates isn’t financially healthy due to a negative net working capital. The company will certainly need to make improvements because at the moment it is facing a problem of meeting its current short-term liabilities with her current assets. Maria should definitely turn this around or she could be facing bankruptcy in a very near future. The not so promising situation is also shown in the current ratio which is fairly below 1. Based on the current ratio it is obvious that the company has a problem in turning its products into cash. A good example of it would be the $7000 which certain clients still owe to the company. In addition Team 5 Auditing Firm also examined the current profitability of Maria Hernandez & Associates. Currently the profit margin at 9.8% which is difficult to evaluate if it is high enough since there is no data about the profitability of other firms in the industry.
On a bit of a brighter side is the debt to equity ratio which is currently less than 1 meaning that a good portion of the assets are...