Financial Ratio Analysis - Harry 's Hamster Limited Financial statements are useful as they can be used to predict future indicators for a firm using the financial ratio analysis. From an investor 's perspective financial statement analysis aims at predicting the future profitability and viability of a company, while from the management 's point of view the ratio analysis is important as it helps anticipate the future conditions in which the firm should expect to operate and facilitates strategic decision making (Brigham and Houston 2007, p. 77). Profitability analysis Harry 's Hamsters Limited (HHL) experienced growth in its profitability from 2007 to 2008; however, the net income reduced significantly during 2009. The return on equity (ROE) …show more content…
However, the quick ratio for the company reveals serious concerns as it has decreased from 1.67 in 2008 to 0.22 in 2009. The low quick ratio implies that a considerable portion of the current assets of the company are tied up as part of its inventory (Bragg 2007, pp. 14-16). This could also mean that HHL might be unable to sell the hamsters and sales might be suffering. The company must increase its working capital to meet its near term current liabilities and retain its solvency (Brigham and Houston 2007, pp. …show more content…
The company performed exceptionally well during 2008, which led to an increase in its debt facility from £ 0.275 million to £ 0.45 million recently. The recent financial results revealed a tightening credit position of the company during 2009, which led to concerns regarding the excess usage of the overdraft facility by the company. Recent communication with the company reveals that it is facing liquidity problems due to its ambitious expansion program; however, the problem can be solved depending on the ability of the management to realise the seriousness of the situation (Madura 2006, pp.
Sales growth after 2000 were only 9%, which the average annual sale growth rates range from 10% to 30% in their industry. The lack of cash is explained by the current liquidity ratio
The Corporation has sustained losses and negative cash flows from operations since its inception. The Corporation is exposed to liquidity risk as it continues to have net cash outflows to support its operations.
Financial ratios are "just a convenient way to summarize large quantities of financial data and to compare firms' performance" (Brealey & Myer & Marcus, 2003, p. 450). Financial ratios are very useful tools in order to determine the health of a company, help managers to make decision, and help to compare companies that belong to the same industry in order to know about their performance.
After analyzing the financial statement, I was able to determine several interesting aspects: a .52 debt ratio shows appeal to lenders; a current ratio of 6.31 is very impressive. Seeing that inventory is so unstable and subject to many natural extraordinary events, the more important acid test shows Mondavi has a comfortable, but less impressive ratio of 1.54.
This report includes financial analysis of retail company ‘’Sainsbury’s’’, one of the biggest retail companies in the United Kingdom .The report examines the financial health of the business and evaluates the business performance by summarising the financial performance and applying financial ratios to further analyse the business’ financial . The financial analysis is displayed by analysing the information gathered from website ‘‘companies’ house’’. All the taken information contains income statements, cash flow statements and balance sheets. By the end of this report, a clear understanding of ‘Sainsbury’s’ financial analysis will be made, so that viable investment decision could be made accurately.
Balance Sheet and Covenants – Our cash position was at 115.1 Days of Cash on Hand at October 31th, although there were 46 offsetting days in third party reserves. Days in Accounts Receivable were at 51.3 days. The Debt Service Coverage Ratio at the end of October was 4.69-to-1 versus the minimum covenant requirement of
Return on Equity (ROE) is defined as net profit/Total equity. This ratio shows how much company earned on the money of shareholders. In 2012, ROE is deeply negative at 44.4% but in 2013, it got significantly improved and touched 6.5%. However, it can’t be treated as a healthy figure but in comparison to profit margin or operating ratio, it is a respectable one.
The results of the ratios all point towards going concern issues as per ASA570. Although the company has been profitable since 2015, the ratios indicates there are severe problems with cash flows and there are growing concerns about their ability to continue as a going concern (ASA 570)
Ratio analysis is one of the most important and powerful tool in analyzing the financial position of the company where ratios are applied for evaluating the financial condition and act of the firm. Investigation and understanding of different accounting ratios gives a clear study and a better understanding of the financial position of the firm
I have leant that ratio analysis offers better insight of a company’s financial position on the short-term and long-term basis. However, I would recommend that investor advice should be based on ratio analysis that considers ratios from several years. This will ensure that the investor is making an informed decision based on the company’s financial ratio performance trend.
Upon examining P&G’s financial ability to meet short-term obligations, it is apparent that not only have their current liabilities exceeded current assets over the last three years, but close to half of their current assets have been tied up in inventories and other illiquid assets. For example, assessing both the quick and current ratio respectively shows that less than 70% of the firm’s current assets could be converted immediately to pay current commitments, but a little more than 90% of the firm’s liabilities would ultimately be covered. Though, based on industry average similar findings occur; therefore, it must not be uncommon for industries similar to P&G to
The Quick Ratio shows that the company’s cash and cash equivalents are the highest t...
This indicates that for every RM 1 investors have invested in company, they only able to earned RM 0.18. However, its return on equity was improved substantially thanks to increase in net profit in year 2014. The company’s return on equity reached the highest among five years at 0.2809 in year 2014. A return on equity is favorable because it indicates that company is able to generate more returns to the shareholders. In year 2015, return on equity of company showed a decrease trend dues to the decrease of net income. In year 2016, company’s return on equity was increased again to 0.2476. In order to further improve return on equity, company should focus on improving their return on sales. In other words, company need to increase return on sales at a rate faster than the rise of their operating costs. In addition, company may increase their debt capital in order to increase its return on equity. This can be increase the return on equity as long as after tax cost of debt is lower than its return on
A financial statement analysis aids in understanding the financial health of a company. By utilizing this evaluative method, investors, shareholders, managers and other affiliated parties are able to determine past, present, and projected performance of a company. Various techniques are used within this evaluative method including horizontal and ratio analysis. These techniques will show a comparison between two or more years of financial data as well as the statistical relationship between the financial data. It is the researcher’s intent to perform a financial statement analysis on Coca Cola Enterprises to demonstrate its potential healthy financial trends to future investors.
Corporate liquidity can be affected by the interim shocks to cash flows, alongside the availability of cash reserves. On the other hand, solvency’s main concerns can be expressed by the financial leverage and average future profitability uncertainty. These relations indicate that there is two ways for a firm to enter financial distress. First, a company can become illiquid after a weak interim cash flow or it can become insolvent if the predicted rate of the cash flow decline