Financial Analysis of Zen Drop Limited

The assignment discusses the financial position of Zen Drop Limited based on its balance sheet and trial balance for the year ended September 30, 2017. The major findings include a strong liquidity position, with total current assets exceeding total current liabilities, indicating the company's ability to pay its creditors. Additionally, the capital structure is found to be more focused on share capital than long-term borrowing, reducing financial risk and interest expenses.

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING
Reflection
After observing the Balance Sheet and Trial Balance of Zen Drop Limited for the year
ended 30 September 2017, I would like to highlight some of the major financial factors of the
company. From the balance sheet of Zen Drop Limited, I have noticed that the total amount of
cash in bank is 9720110. While comparing the current assets and liabilities of Zen Drop Limited,
I have seen that the total amount of current assets is higher than the total amount of current
liabilities. In case of the accounts receivable and accounts payable of the company, I have
observed that the total amount of accounts receivable is higher than the total amount of accounts
payable of the company (Anjum and Malik 2013). This is a strong financial indicator for Zen
Drop Limited that it has the sufficient liquidity position to pay the business creditors. From this, I
have concluded that the liquidity position of the company is good as Zen Drop Limited has the
financial capability to pay its current obligations (Holden, Jacobsen and Subrahmanyam 2014). I
would also like to mention the fact the overall financial position of Zen Drop Limited is in good
shape as the total assets of Zen Drop Limited is higher than its total liabilities. I have also
observed the fact that the amount of share capital is more than that of non-current liabilities that
is loans. From this, it is clear that the capital structure of Zen Drop Limited consists more of
share capital that long-term borrowing (Dalal 2013). This aspect reduces the financial risk of the
company and Zen Drop Limited does not have to bear large amount of interest expenses (Jain,
Singh and Yadav 2013). Hence, based on the above discussion, I would like to mention the fact
that the financial position of Zen Drop Limited is in good condition as the company has strong
liquidity position and the proportion of share capital is more in the capital structure of Zen Drop
Limited.

2ACCOUNTING

3ACCOUNTING
References
Anjum, S. and Malik, Q.A., 2013. Determinants of corporate liquidity-An analysis of cash
holdings. Journal of Business and Management, 7(2), pp.94-100.
Dalal, G., 2013. Capital Structure Decisions. Journal of Business Management Social Sciences
Research (JBM&SSR) ISSN, (2319-5614).
Holden, C.W., Jacobsen, S. and Subrahmanyam, A., 2014. The empirical analysis of
liquidity. Foundations and Trends® in Finance, 8(4), pp.263-365.
Jain, P.K., Singh, S. and Yadav, S.S., 2013. Capital Structure Decisions. In Financial
Management Practices (pp. 77-158). Springer India.