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Financial Management Analysis of ABC Retail Company

This assignment requires the analysis of financial information of ABC Retail Company and answering various questions related to the company's shares, market capitalization, P/E ratio, working capital management, profitability, and solvency.

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Added on  2023-06-08

About This Document

The report contains an overall financial analysis of ABC Retail Company for the past three years. It analyses its liquidity, profitability and solvency with the help of relevant ratios. Furthermore, it also concentrates on the calculation done for estimating the share price and market capitalization of ABC at the year end of 2018. Working capital management is also discussed in the report with the use of relevant ratios. At the last, the findings of the analysis are described in conclusion.

Financial Management Analysis of ABC Retail Company

This assignment requires the analysis of financial information of ABC Retail Company and answering various questions related to the company's shares, market capitalization, P/E ratio, working capital management, profitability, and solvency.

   Added on 2023-06-08

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RUNNING HEAD: FINANCIAL MANAGEMENT
Financial management
Financial Management Analysis of ABC Retail Company_1
Financial management 2
Contents
Introduction.................................................................................................................................................3
Requirement 1.............................................................................................................................................3
Part A......................................................................................................................................................3
Part B.......................................................................................................................................................3
Part C.......................................................................................................................................................4
Requirement 2.............................................................................................................................................5
Current ratio............................................................................................................................................5
Quick ratio...............................................................................................................................................5
Requirement 3.............................................................................................................................................6
Requirement 4.............................................................................................................................................6
Requirement 5.............................................................................................................................................7
Conclusion...............................................................................................................................................7
References...................................................................................................................................................8
Appendix.....................................................................................................................................................9
Financial Management Analysis of ABC Retail Company_2
Financial management 3
Introduction
The report contains an overall financial analysis of ABC Retail Company for the past three years.
It analyses its liquidity, profitability and solvency with the help of relevant ratios. Furthermore, it
also concentrates on the calculation done for estimating the share price and market capitalization
of ABC at the year end of 2018. Working capital management is also discussed in the report with
the use of relevant ratios. At the last, the findings of the analysis are described in conclusion.
Requirement 1
Part A
In the below table the share price of ABC Retail Company is calculated by multiplying the P/E
ratio with the EPS reported at 30th June 2018.
Part A
30th June 2018
EPS (A) 0.02
P/E ratio (B) 7.66
Share price (A*B) $ 0.15
Part B
Market capitalization reflects the overall market value of the company and is calculated by
multiplying its current share prices with weighted average number of shares outstanding.
Part B
30th June 2018
Financial Management Analysis of ABC Retail Company_3
Financial management 4
Share price (A) $ 0.15
Number of shares outstanding (B) 2050
Market Capitalization (A*B) $ 314.06
Working notes:
Calculation for number of shares
Earnings Before Interest and Tax $ 1,305.00
Interest Expense $ 1,247.00
Earnings Before Tax $ 58.00
Tax Expense $ 17.00
Net income $ 41.00
EPS 0.02
Number of shares (Net
Income/EPS) 2050
Part C
Price to earnings ratio reflects the willingness of the investors in respect of paying a certain
amount per dollar of earnings. It is also known as price-multiple which measures company’s
current stock prices with its earnings per share. In case of ABC Retail, the current P/E ratio is
7.66 which is lower than the industry average of 17.4 (Linked In. 2017). As it is below the
average it indicates that the shares of ABC are undervalued and the stock price trade lower. This
will give an opportunity to the investors to buy the stock at low price and sell it later on at higher
ones in order to book profit (Bragg, 2012).
Financial Management Analysis of ABC Retail Company_4

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