Financial management of a company
Added on 2021-05-27
17 Pages4160 Words472 Views
|
|
|
Running head: FINANCIAL MANAGEMENTFinancial ManagementName of the Student:Name of the University:Authors Note:
FINANCIAL MANAGEMENT2Table of ContentsIntroduction:...............................................................................................................................2Analysis of the income statement of the company:...................................................................3Ratio Analysis:...........................................................................................................................4Argument regarding the future profitability of the organisation:...............................................7The impact of the competition on the functioning of the company:..........................................8Different ethical considerations in case the organisation becomes insolvent:...........................8The various external factors that are needed to be taken into consideration and the likely hoodof merger and acquisition:..........................................................................................................9Conclusion and recommendation:............................................................................................10Reference..................................................................................................................................12
FINANCIAL MANAGEMENT3Introduction:In the present report, an effort will be made in respect of presenting the economicissues that were being faced by the online retail giant Amazon. It is quite understandable thatthe company was facing issues of becoming profitable and create value for its shareholders.The reason being that the company had arranged for huge amount of funds from theshareholders and other financial institutions and the third parties. Due to the decrease in thevalue of the stocks as a result OF the dot com phenomenon in the year 2000 the company hadlose a huge amount of its value. It is this required to identify the ways in which the companycan increase its value by increasing the profitability of its business (Titman et al., 2017). Forthe analysis of the situation, a deeper study will be conducted of the various ratios and theincome statement of, the company along with the balance sheet of the company. Based on theresults of the analysis that is being carried out, several recommendations will be made inrespect of the viability of the future operations of the company and the propriety of theinvestment made by the shareholders until date in the company. Analysis of the income statement of the company:As per the information that is being available from the income statement of the company,the following observations can be made:a)The growth of the sales of the company amounted to $2761983000 and $1639839000in the year 2000 and 1999 respectively. During the same corresponding period, thecost of sales OF, the company amounted to $21062016000 and $1349194000. Thismeans that the common show a growth of around 68% in respect of its sales (Renz &Herman, 2016). However, deign the same period the cost of sales of the companygrew at a pace of around 49%. It is very understandable that due to the difference inthe growth rates of the sales of the company and the cost of sales it was possible for
FINANCIAL MANAGEMENT4the company to earn profits. However, the rate of increase in the cost of the companycannot be justified by the overall increase in the gross profit of the company. Thereason being that there are several other costs that will soon catch up with the profitsof the company and diminish its overall return. b)It can be observed that the expenditure incurred by the company in respect of thefulfilment costs has increased significantly over the years. The fulfilment costs of thecompany amounted to $15944, $65227, $237312 and $414509 respectively for theyear 1997, 1998, 1999 and 2000 respectively (Lau, 2016). It can be clearly seen thatthe among incurred by the company in respect of the fulfilment costs increasedaround 25 times. The effect of the same can be felt in the loss that the company ispresently earning. The expense has overshadowed the impact of the gross profitearned by the company. The company needs to control the amount of fulfilment costsimmediately. c)The interest expense of the company amounted to $326, $26639, $84566 and $130921for the year 1997, 1998, 1999 and 2000 respectively. From this, it can be effectivelyconcluded that the interest expense of the company has risen substantially over theperiod of four years. The reason being the ever-increasing borrowing amount of thecompany (Waxman, 2018).Ratio Analysis:1)Net profit margin:Net Profit Margin 2000199919981997Net Profit -1411273-719968-124546-31020Sales 27619831639839609819147787Net Profit Margin -0.51-0.44-0.20-0.21
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents