Comment on financial position and performance, Financial Accounting

Assignment Help:

BFD Co has occurrence rapid growth in turnover since its formation three years ago but it has been unable to maintain net profit margin which has fallen from 19% in 2002 to 12% in 2004. On an optimistic note our net profit margin is higher than the sector average but this may as well indicate that a further decrease may arise.

Our growth in turnover hasn't been matched by growth in long-term finance. Separately from the original equity investment made by the founder directors growth in long term finance has been through retained earnings alone. Our company has more and more relied on short-term finance and over the three-year period the overdraft has grown from $50000 to $1167000. From a monetary risk point of view gearing has increased from 4% to 54% and interest cover has declined from 165 times to nine times. Both ratios are at present worse than the comparable sector average. An average period of time in which we settle with trade payables has grown from 69 days to 90 days compared to a sector average of 70 days.

The average sum of credit extended by the sector is 75 days but our receivables' ratio has grown from 56 days to 98 days. This has raised the amount of working capital finance we need as has the growth in inventory days from 104 days to 116 days compared to a sector average of 85 days. Finances which are tied up in inventory and receivables decrease profitability.

There is additional bad news in the area of working capital management since both our current ratio and quick ratio are less than the current sector average having declined in each of the past two years.


Related Discussions:- Comment on financial position and performance

Partnership accounting, How does ordinary shares and preference shares incl...

How does ordinary shares and preference shares included in the account

Cumulative nature of the returns on the predilection shares, A changeable ...

A changeable instrument is deemed part liability and part equity. IAS 32 necessitate that each part is measured individually on initial recognition. The liability element is

Receiver appointed by court-bankruptcy and liquidation, Receiver appointed ...

Receiver appointed by court If appointed by the court, the receiver must give security as directed by the court. The following notification must be given: (a) The debenture h

Case Study, I have a case study due in one of my classes. There are 3 pages...

I have a case study due in one of my classes. There are 3 pages of information about the company in the case, and there are 12 questions I must complete. Each question is basically

Estimate present value, Calculating Present Value [LO1]  An investment will...

Calculating Present Value [LO1]  An investment will pay you $43,000 in 10 years.  If the appropriate discount rate is 7 percent compounded daily, what is the present value?

IFRS vs Gaap, #questBackground: The SEC set up the Work Plan which sets for...

#questBackground: The SEC set up the Work Plan which sets forth specific areas and factors to consider before potentially transitioning our current financial reporting system for U

Litigation support and dispute resolution, Litigation Support/Dispute Resol...

Litigation Support/Dispute Resolution - A service that CPAs every so often provide to attorneys -for example expert testimony about the value of a business or other asset, for

Conditions of a will-executorship laws and accounts, Conditions of a will ...

Conditions of a will A written will is not valid unless it fulfills the following conditions. 1) The testator must sign the will; or he must affix his mark to the will (i.e. a

Fair value adjustment-group accounts, Fair value adjustment IFRS 3 requir...

Fair value adjustment IFRS 3 requires that goodwill on consolidation should be based on the fair values of the net assets of the subsidiary company on the date of acquisition. T

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd