TFS Corporation Ltd
Financial Analysis Report
This report will comment on the profitability, efficiency, market values and the short and long term financial stability of TFS Corporation LTD. The analysis will be conducted using consolidated statements of comprehensive income, financial position, changes in equity, cash flow and historical statistics to provides an analysis and evaluation of the current and prospective profitability, liquidity and financial stability of TFS Corporation LTD. These resources are obtained from the TFS Corporation’s annual reports of 2012 and 2013. Financial ratios and balance sheet comparisons will be used ...view middle of the document...
TFS Corporation has done significantly well from 2012 to the 2013 financial year, recording an impressive 115% growth in net profit after tax, and also boasting an impressive 114% improvement in earnings per share (appx 1, Tb 1, Item 6,7). TFS did considerably well across the board and closed it off with a 41% increase in retained profits.
TFS Corporation’s financial stability can be determined by the return on asset ratio, which for 2013 was 65% compared to 25% in 2012 (Appendix 1, Tb 2, item 1). This was due to the exceedingly large net profit before tax was recorded by the company. The net profit of margin had also increased from only 25% to 45% (Appx 1, Tb 2, item 2) from 2012 to 2013, also showing that there was an increase in the profit for the period. Judging by the doubling of the return of asset ratio (ROA) from 5% to 10% (Appx 1, Tb 2, item 5) respectively, we can safely say the earning power of TFS has also increased. The profitability ratios have clearly illustrated that TFS has seen a very profitable year in 2013 compared to 2012.
According to the company’s debtor’s turnover ratio, there has been no change in the last two years but considering the ratio has only been 1.3 (Appx 1, Tb 2, item 5) it shows that the company has less liquid debtors or an inefficient management plan of debtors. They have to implement more management plans to increase the efficiency of the debtors and make debtors more liquid.
The Average day's sales uncollected has been pretty good as the percentage values were low, thus showing that there is not a lot of time between sales and payment received.
The current ratio calculated shows that the TFS Corporation is more than capable of repaying its short term liabilities as it is 3.88 (Appx 1, Tb 2, item 9)for 2013, but when compared to the results of 2012 where the ratio was 5.75 shows that there has been a reduction in its ability for short term solvency. This issue was due to the 55% (Appx 1, Tb 1, item 11) increase in current liabilities and only a 4% (Appx 1, Tb 1, item 8) increase in current assets from 2012 to 2013.
The quick ratio, though sufficient at 3.4 (Appx 1, Tb 2, item 10) has also seen a reduction from 2012 due to the same reasons addressed above. The company needs to address the issue and implement ideas to increase current assets and reduce the current liabilities. The cash flow liabilities on the other hand have increased dramatically from -194% to 45% (Appx 1, Tb 2, item 11), clearly outlining the increase in the cash flows from operation in 2012 to 2013. This is good news for creditors.
Long term solvency:
The debt to equity ratio for 2013 has increased by 7%; from 82% to 89% (Appx 1, Tb 2, item 12) in 2012, thus showing an increase in liabilities. The debt to total asset has also increased from 45% to 47% (Appx 1, Tb 2, item 13) showing that the increase in total liabilities was greater than the...