Financial Analysis Of A Company

1947 words - 8 pages

Financial Analysis of a Company

Contents

* Executive summary ………………………………………………………………………………………..3
* Introduction ………………………………………………………………………………………………….4
* Financial Results of ABC Ltd……………….....….…………………………………….………………..4
* Profit & Loss Statement (Income Statement)….…………………………………………….……...…..5
* Statement of Financial Position (Balance Sheet)……………………………………………….……....6
* Cash Flow Statement…………………..…………………………………………………………….…….7
* Key Performance Measures……….………………..……………………………………………………..8
* Financial Ratios Benefits & Limitations……………..…………………………………………………...11
* Conclusion and Recommendations……………………………………………………………………….12 ...view middle of the document...

Introduction

This report reviews ABC Ltd financial condition and results of operations for fiscal year ended March 31, 2010. It also comments on the anticipated financial performance, discusses factors that may affect company’s future financial condition and performance, and makes other forward-looking statements. This succinct study also provides analysis of some financial ratios, which help to determine company’s financial health; however it also looks into risk associated with heavy reliance on these measurements.

Financial Results 2010

Performance and other forward-looking statements contained in this report are based on information currently available and on certain assumptions deemed rational at the time of this report’s release. The following criteria of estimates and assumptions are applied when preparing the below financial statements;
1) “Premises” are recognized only as “Office Building” of the company and no land is taken into consideration. And as per ISA 16 these are depreciated along with other fixed assets, and based on the information provided these are depreciated on a straight line basis over the estimated useful lives of 5 years.
2) Income taxes are not considered in the below calculations.

Profit & Loss Statement (Income Statement)

Statement of Financial Position (Balance Sheet)

Cash Flow Statement

Key Performance Measures

Liquidity Position: In fiscal year 2010, we managed the liquidity conservatively to meet current obligations and fund capital expenditures. Our financial stability remained positive during first year of the operations as indicated by Current Ratio at 8.8, which means that for every pound in current liabilities, there is £8.8 in current assets. This also means we are able to pay off any shot-term creditors with no difficulty if needed. However the drawback of such a high Current Ratio is that having so much money tied up in debtors means that our cash reserves in hand (at bank) are so low, currently at -£97,000. In order to get this improved the suggestion is to introduce strict credit terms to increase efficiency in cash reserves. Working capital for fiscal 2010 was positive at £798,000, which indicates company’s positive cash position to keep the operations going and pay short-term liabilities during start up period and contribute to the success of the business, however as mentioned earlier the cash reserves issue has to be addressed and needs improvement. Our ability to consistently generate cash from operations was one of our most significant financial strengths. Cash provided by operations was £178,000 in fiscal 2010. Operating Cash Flow Ratio of 1.75 confirms that company well covers its current liabilities by the cash flow generated from a company's operations. Cash used for financing activities reflects the net debt repayments. Through these excellent results we assure strong margin of safety to our creditors, pay our debts, fund ongoing operations as well...

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