Financial Report for Financial Decisions

The aim of the assignment is to conduct a financial analysis on the Kathmandu Holding Ltd using ratio analysis. The application of the ratio analysis in analysing the financial statement of the company for the trend period 2017 and 2018 was take into consideration for the company.

Running head: FINANCIAL REPORT FOR FINANCIAL DECISIONS
FINANACE
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1FINANCIAL REPORT FOR FINANCIAL DECISION
Executive Summary
The aim of the assignment is to conduct a financial analysis on the Kathmandu Holding Ltd
using ratio analysis. The application of the ratio analysis in analysing the financial statement
of the company for the trend period 2017 and 2018 was take into consideration for the
company.

2FINANCIAL REPORT FOR FINANCIAL DECISION
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Ratio Analysis........................................................................................................................3
Conclusion..................................................................................................................................6
Reference....................................................................................................................................7
Appendix....................................................................................................................................8

3FINANCIAL REPORT FOR FINANCIAL DECISION
Introduction
The financial analysis of the Kathmandu Holdings Ltd was carried on with the help of
Ratio Analysis for the company for the trend period 2017 and 2018. The ratio taken for the
purpose of the analysis of the company was Current Ratio, Return on Capital Employed, Debt
to Equity Ratio and Total Asset Turnover Ratio. Various ratio were included for assessing the
overall performance of the company in terms of profitability, asset management, leverage and
liquidity of the company (Baños-Caballero, García-Teruel and Martínez-Solano 2014).
Discussion
Ratio Analysis
Current Ratio: The current ratio is a key measure for assessing the liquidity of the company
and the ability of the company in paying off with the current obligations of the company. The
current ratio was evaluated for the Kathmandu Ltd for assessing whether the company is able
to sufficiently meet the obligations of the company (Chandra 2017). The Current ratio of the
company was around 1.47 times in the year 2017 which increased to around 1.53 times in the
year 2018 reflecting that the company is managing sufficient current assets in order to meet
the current obligations of the company (Appendix 1).
2017 2018
1.44
1.46
1.48
1.5
1.52
1.54
Current Rati o
Figure 1: Current Ratio
(Source: Annual Report 2018)

4FINANCIAL REPORT FOR FINANCIAL DECISION
Return on Capital Employed: The return on capital employed is an important profitability
measurement tool that is applied by the company for measuring the efficiency of the
company in generated by the company (Greco, Figueira and Ehrgott 2016). The return on
capital employed by the company in the year 2017 was around 11.63% for the company
which increased to around 12.02% in the year 2018. The rising revenue of the company in
contrast to the overall expenses of the company was the key reason for such increase and
improvement in profitability of the company (Appendix 1). The ROCE is a key measure that
is applied for assessing the financial performance and return generated by the company on a
long-term basis.
2017 2018
11.40%
11.50%
11.60%
11.70%
11.80%
11.90%
12.00%
12.10%
Return on Capital
Employed
Figure 2: Return on Capital Employed
(Source: Annual Report 2018)
Debt to Equity Ratio: The debt to equity ratio shows the amount of debt in contrast to the
equity position in a company. The debt ratio was selected for analysing the financial risk or
the level of the debt exposure the company has in contrast to the equity of the company
(Vogel 2014). The debt to equity ratio for the company was around 3.19% in the year 2017
that increased to around 9.40% in the year 2018 in contrast to the equity of the company
(Appendix 1). On an overall basis the debt exposure of the company is still at a very minimal
point allowing the company to have mix capital structure in the company and enjoy the
benefit of debt financing such as low rate financing and tax advantage from the same.

5FINANCIAL REPORT FOR FINANCIAL DECISION
2017 2018
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
Debt to Equity Rati o
Figure 3: Debt to Equity Ratio
(Source: Annual Report 2018)
Total Asset Turnover Ratio: The total asset turnover ratio shows the efficiency of the
company in generation of revenue by utilizing the key assets of the company. The ratio has
been selected for assessing the efficiency of the management of the company in terms of
utilization of assets of the company. The total asset turnover ratio for the company was
around 101% in the year 2017 and was around 81% in the year 2018 (Appendix 1). The
current financial year reflected an under-utilisation of the assets of the company where the
total assets of the company increased for the company but the substantial increase in revenue
for the company was not at the same rate. It is necessary for the management of the company
to effectively utilize the assets of the company and generate significant amount of revenue in
contrast to the same (Weygandt, Kimmel and Kieso 2015).
Figure 4: Total Asset Turnover Ratio
2017 2018
0%
50%
100%
150%
Total Asset
Turnover Rati o

6FINANCIAL REPORT FOR FINANCIAL DECISION
(Source: Annual Report 2018)
Conclusion
On an overall basis the financial performance of the company was found to be stable
for the company where the profitability, liquidity, leverage and efficiency of the company
was assessed. The financial performance of the company was assessed to be financially stable
for the company where the company has provided consistent return for the shareholders of
the company. The liquidity position of the company was also stable and sound for the
company. The financial risk and the debt exposure for the company was at a minimum point
for the company indicating low level of financial risk for the company. The only key thing
that the company need to focus is on utilisation of the assets of the company for generating
better and sustainable long-term growth rate for the company.

7FINANCIAL REPORT FOR FINANCIAL DECISION
Reference
Annual Report 2018. (2018). [ebook] KATHMANDU HOLDINGS LIMITED, pp.33-35.
Available at: https://www.kathmanduholdings.com/wp-content/uploads/2018/10/KMD-AR-
2018-online-final.pdf [Accessed 15 Feb. 2019].
Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P., 2014. Working capital
management, corporate performance, and financial constraints. Journal of Business
Research, 67(3), pp.332-338.
Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.
Greco, S., Figueira, J. and Ehrgott, M., 2016. Multiple criteria decision analysis. New York:
Springer.
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting.
John Wiley & Sons.

8FINANCIAL REPORT FOR FINANCIAL DECISION
Appendix
1) Ratio Analysis of Kathmandu Holdings Ltd
Particulars 2017 2018
Current Asset 99027 160784
Current Liability 67244 104888
Workings =B3/B4 =C3/C4
Current Ratio 1.472652 1.532911
Net Profit 38039 50532
Total Shareholder's Equity 327100 420382
Workings =B8/B9 =C8/C9
Return on Capital Employed 11.63% 12.02%
Total Long Term Debt 10431 39500
Total Shareholder's Equity 327100 420382
Workings =B13/B14 =C13/C14
Debt to Equity Ratio 3.19% 9.40%
Sales 445348 497437
Total Assets 439067 614617
Workings =B18/B19 =C18/C19
Total Asset Turnover Ratio 101% 81%
Kathmandu Holdings Ltd