Analysis of Business Performance of T-shirt Ltd

This report analyzes the business performance of T-shirt Ltd through financial ratios and accounting methods. It also discusses the benefits of cash accounting and accrual accounting. The budgeting process and its essential techniques are explained. The advantages of being a public entity and being registered in the stock exchange are also discussed.

Business Finance

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Analysis business performance of T-shirt Ltd........................................................................3
TASK 2............................................................................................................................................7
TASK 3..........................................................................................................................................10
CONLCUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Market companies need efficient control of their financial capital to operate their business
operations in the present dynamic competitive working circumstances. Finance seems to be the
flow of capital that circulates through the company's core operations. It's organisation's blood.
The value of corporate finance is already understood by T-shirt Ltd. This report consists of
market performance assessment by estimation and evaluation of the different ratios. The exact
and cash-based accounting method also describes this. It concerns how administrators use the
budget efficiently to make plans and identify the potential value of benefit. The advantages of the
public association registrar on the stock exchange have been accurately defined in this paper.
TASK 1
Analysis business performance of T-shirt Ltd
To assess a firm's business results, managers should use profitability statement from which
differences occur in each component during an accounting system may be readily understood.
Statement of P/L: After refunding all the related costs, this financial plan is required to measure
the income received by the corporate entity. Through formulating such declaration manager, the
impact of each element on benefit generation will easily be understood (Yadav and Kapoor,
2018).
Profitability ratio:
G/P ratio
Particular 2018 2019
Gross profit 1261 615
Sales 2101 1366
Gross profit ratio = GP/ Sales
*100
60.01% 45.02
Operating profit ratio
N/p ratio
Particular 2018 2019
Net profit 372 -500

Sales 2101 1366
Net profit = NP/ Sales *100 17.07 -36.66
ROA ratio
Particular 2018 2019
Net revenue 2101 1366
Total assets 1634 1700
ROA = Net revenue / Total
assets
1.28 0.8
ROE ratio
Particular 2018 2019
Net revenue 2101 1366
Shareholders’ equity 810 310
ROE = Net revenue/
Shareholder's equity
2.59 4.4
Interpretation: Income statements are used to calculate the organization's productivity
percentage. The studies consider key issues related for profit making. Ii consider restriction
not just to item contained or applicable to the financial statements, but also certain issues
pertaining to the skill balance sheet are considered. Gross profit margin, allowing the
company to assess sales from selling a items. T-shirt Ltd produces 60% of the overall
income from the fiscal year 2018, however as opposed to the preceding year, still are never
able to produce a high gross distribution level in 2019. This impacts the net benefit ratio
positively. In comparison, as opposed to 2018, companies are unable to gain benefit because
they experience high losses (Kim, Baik and Cho, 2016). Owing to high losses spent on
running company operations, their net income reduced. T-shirt Ltd, because of its potential
condition, it is very difficult for companies to have reasonable profit to their stakeholders. In
2018, return generated from the use of properties, T-shirt Ltd is better, able to produce 1.28
% of sales from the use of its company assets although in 2019. They change their company

properties in order to gain 0.8. Although as compared to 2018, the level of revenue
generated by investment in 2019 is also much higher. The reduction in turnover rate
indicates that T-shirt Ltd does not handle its financial resources adequately but does not use
appropriate management strategies. As compared to future cash flow market operations,
poorly managed of the financial system, the amount of cash outflow reserves is growing.
Balance sheet ratio
Department of managers also analyses the influence of each financial sheet products on
company organisation results by using financial sheet ratio (Laitinen and Suvas, 2016).
Liquidity ratio
C/R ratio
Particular 2018 2019
Current assets 352 426
Current liabilities 824 1390
Current ratio = CA/CL 0.42 0.3
Quick ratio
Particular 2018 2019
Quick assets 352-89 = 263 426 – 121 = 305
Current liabilities 824 1390
QR = Quick asserts / Current
Liabilities
0.31 0.21
Efficiency ratio
Stock turnover ratio
Particular 2018 2019
Cost of goods sold 840 751
Average inventory 89 121
Stock turnover = Cogs/ 9.43 6.2

Average stock
Receivable turnover ratio
Particular 2018 2019
Net credit sale 2101 1366
Average account receivables 218 305
Receivable turnover = Net
credit sales / Average
receivables
9.63 4.47
Capital gearing ratio
Debt ratio
Particular 2018 2019
Total debt 824 1390
Total assets 1282 1274
Debt ratio = Total debt / Total
assets
0.64 1.09
DOE ratio
Particular 2018 2019
Total liability 824 1390
Value of total shareholder's
equity
810 310
Debt / Equity 1.01 4.48
EPS ratio
Particular 2018 2019

Net revenue 2101 1366
Total number of share/ Value
of share
310 310
EPS = Net revenue/ Number of
share
6.77 4.4
In order to assess the inventory of financial assets an entity needs to satisfy its
obligations, liquidity levels would be determined by the organisation. Both are closely linked to
the potential to secure funding by trading practises. The value of the present ratio determines the
relation between assets and liabilities. The current ratio valuation of T-shirt Ltd is significantly
higher in 2018, which means that companies have ample cash reserves to reach their debt
obligations by compression.
They measure the productivity ratio that assists in the company entity's identification
capacity to pay borrower debt as well as time needed to turn raw material into finished product
and receive cash. The inventory turnover ratio of T-shirt Ltd is also much greater, meaning that
the company needs more opportunity to address cash from its stock.
In 2019, T-shirt Ltd takes 9 days to raise funds through debtors held by the other side, and will
obtain payments from debt holders within 4 days.
That implies also that T-shirt Ltd does not produce sales efficiently, but they function
successfully to manage their policies on company debtors. The influence of obligations and also
resources and the relation between them is defined by using capital structure. The financial
leverage ratio is used to recognize the importance of the funds needed to satisfy debt obligations
and the firm's capacity to fund its cash. The 202189 debt proportion is relatively poor, which
means T-shirt Ltd market efficiency is higher than 2019, even though it gives far more shares
advantages compared to 2019 (Eng and Vichitsarawong, 2017).
It is known that T-shirt Ltd performs much stronger compared to 2019 by measuring market
results by estimating ratio, since they do not earn adequate profit but are unable to retain
resources in practice.
TASK 2
Brief description related with financial information & management of cash of T-shirt Ltd

accrual accounting lies in the timing of when sales and purchases are recorded in
company accounts. Cash accounting recognizes revenue and expenses only when money changes
hands, but accrual accounting recognizes revenue when it’s earned, and expenses organization
billed. The main difference between the two methods is in the timing of transaction recordation.
In aggregated over time, the results of these two methods are approximately the same.
Benefits of cash accounting:
1. Not require expert accounting knowledge: This system does not require expert accounting
knowledge. It is just based on the actual receipt and actual payment of cash. So, small businesses
and sole proprietors can easily record and maintain their transactions in a small notebook without
preparing a separate set of systematic books. Concept of accrual accounting versus Cash
accounting: The difference between cash and the results for a period.
2. This system is less time consuming: This is the simple and requires no recording. Transaction
compared to accrual system, it is less time consuming.
3. Exists in the present: Another advantage of cash-basis accounting is that it lets company easily
see how much cash in company actually have on hand.
Disadvantage:
Only small and small size pictures are seen in this company: The cash basis method shows a cash
flow but that can often be misleading. It does not show those earnings that have been invoiced
but still not received. It also leaves out the upcoming expenses that have been invoiced but have
not been deducted. It can be quite misleading too. For instance, in one month company may find
the revenues are high. However, on the closer analysis, company may find the extra cash was
paid by customers who cleared their due bills.
Looking at a large company, a flaw of single entry is found in cash basis accounting:
The single entry system may be advantageous for small entities but it can be erroneous for large-
sized or growing companies. In the accrual method- double entry is necessary which offers better
control.

Benefits of accrual accounting:
Many business transactions occur over a period of several months and therefore several
accounting periods. Accrual accounting reflects that income and expenses generated in one
month can carry over into the next month or even longer.
1. Investors prefer accrual accounting:
A business that uses accrual accounting is often looked at as more permanent and established
than businesses that use cash-basis accounting methods. In view of today's era, it is very
important to have good and bright investors in the business so that the business can be carried
forward.
2. This accounting allows for easy planning:
One process that will come in handy with basic is accounting planning, especially that it allows
the company to account for all expenses and revenues of the company within the correct period.
Aside from easier planning, this accounting method can help with reducing company tax burden
by issuing invoices at the start and the end of the year.
Disadvantage:
1. A quick appraisal of the profit or loss is not possible because many adjustments are required to
be made to ascertain the true financial position of the business.
2. This system does not distinguish between capital and revenue items as a result there is no
consistency in the profits of consecutive years.
3. In order to remain accurate, accrual accounting needs frequent reports generated. These are
usually the monthly financial statements most business managers are familiar with, such as the
income statement and balance sheet. But accounts receivable and accounts payable reports are
often generated on a more frequent basis. Therefore, they are not proved to be correct and
accurate.
Difference between profit & cash flow:
Profit Cash flow
Profit is the revenue remaining after deducting
business costs.
While cash flow is the amount of money
flowing in and out of a business at any given
time.

Profit is more indicative of company
business’s success.
but cash flow is more important to keep the
business operating on a day-to-day basis.
For calculating profit , managers use to
formulate profit and loss statement.
By preparing cash flow statemented manager
recognize value of cash inflow activities.
Profit useful in growth and development of
organization.
Cash flow useful in running and managing
business by prodigy Fianna source.
Profit help in achieving business objective. Cash flow useful in enacting business capital.
TASK 3
Explanation of budget and its essential techniques

Budget: A budget is a formal statement of estimated income and expenses based on
future plans and objectives. In other words, a budget is a document that management makes to
estimate the revenues and expenses for an upcoming period based on their goals for the business.
There are tons of different kinds of budgets from short-term and long-term to department
specific. Management can make a budget for anything.
The important thing to remember is these budgets are really just the management’s future goals
and plans for the business written down in financial form. For instance, if management were
planning to purchase a new piece of equipment next year, that expense would show up in the
budget.
Following are the main requirement of formulating budget:
Provide structure. A budget is especially useful for giving a company guidance regarding the
direction in which it is supposed to be going. Thus, it forms the basis for planning what to do
next.
Measure performance. A common objective in creating a budget is to use it as the basis for
judging employee performance, through the use of variances from the budget. This is a
treacherous objective, since employees attempt to modify the budget to make their personal
objectives easier to achieve.
This is also the main objective of the budget.
1. To ensure planning for future by setting up various budget. The requirement and expected
performance of enterprise are anticipated.
2. To co-ordinate the activities of different departments.
3. To operate various department with efficiency and economy.
4. Elimination of wastage and increase in profitability.
5. Controlling function is made to be effective.
6. Fixation of responsibilities of various individual in the organization.
7. Correction of deviation from the established standards.
Company finance
Benefits of formulate as public entity & registered in stock exchange:

Stock exchange allows businesses to access capital and boosts their public image. The
knowledgeable businesses are able to harness stock exchange control to heighten and develop
their companies. Before investing in any company it is mandatory to review the company’s track
record. While there is substantial controlling and financial costs associated with the listing on
stock exchange, the advantages outweigh the disadvantages. Here are the benefits that most
companies listed in the stock exchange enjoy.
Democratise management: Monopoly organization structure is not made, in this type of
organization, they use democratic management style in which every personal have right to share
their perception regarding taken decision.
Tax benefits: due to register as public company, government provide benefits of subsidiaries as
well also give tax advantage them. Stocks defer taxation of the investor’s gains too. After
purchasing stock, there is no need of filing a return on the earnings if the stock value increases.
The investor only needs to report the stock additions when selling the shares.
Enhances branding and corporate value: Violation of security laws might lead to legal
measure like halt, fine, de-listing or suspension of securities from the exchange.
Benefits of registered in stock exchange
Transparency and efficiency: Transparency and efficiency are two such aspects that are crucial
for the company’s operation and growth. Listing brings both efficiency and transparency to the
company. Besides, the management team and board of the listed company hold accountability
towards its shareholders.
Increased Exposure: A company listed on the stock exchange often gets more exposure than
others. IPOs are mostly advertised and could be covered in investment journals, financial
magazines, and news stories.
Growth and stability: Growth and stability in the market through broadening and diversification
of its shareholding.
Profitable in the interest of investors: Listing attracts interest of institutional investors of the
country as well as foreign institutional investors.
T-shirt Ltd is public sector organization which is listed in London Stock exchange, thus even
after suffering from loss and economic crises the organization maintain position due to have

strong goodwill within the market. They got benefit and competitive advantage to defeat with
their rival industries.
CONLCUSION
The above analysis shows that it is very important to arrange finance to keep company steps in
the market. It refers as fund required for running trade activities. By applying relevant
accounting system manager able to record each transaction, which beneficial in prepare budget
and financial statement in effective manner. Business organization by evaluate ratio able to
reconsign performance of business .There will be many options personal have to register their
organization but formulating as public entity help in generate more finance as well as provides
benefits of transferability, security , and long term sustainability to business organization.

REFERENCES
Books and Journals
Yadav, S. K. and Kapoor, R., 2018. Financial performance ranking of automotive companies in
India using TOPSIS method. International Journal of Business Excellence, 16(2),
pp.149-161.
Kim, Y. J ., Baik, B. and Cho, S., 2016. Detecting financial misstatements with fraud intention
using multi-class cost-sensitive learning. Expert Systems with Applications, 62, pp.32-
43.
Laitinen, E. K. and Suvas, A., 2016. Financial distress prediction in an international context:
Moderating effects of Hofstede’s original cultural dimensions. Journal of Behavioral
and Experimental Finance, 9, pp.98-118.
Eng, L. L. and Vichitsarawong, T., 2017. Usefulness of Accounting Estimates: A tale of two
countries (China and India). Journal of Accounting, Auditing & Finance, 32(1), pp.123-
135.