BGC Ltd Company Financial Ratio Analysis and Cash Budget Report
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Added on Β 2023/06/10
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This report presents the financial ratio analysis and cash budget of BGC Ltd Company which provides cleaning services in high street shop and out of town shopping malls and offices. The report suggests effective policies to attract domestic market and generate revenues.
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Part 2 Assignment Part 1 and 2
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Table Of Content οIntroduction οPart A οPart B οPart C οConclusion οReferences
Introduction οThis report based on the BGC Ltd Company which provides cleaning services in high street shop and out of town shopping malls and offices. The company face issue of less liquidity in company due to COVID 19 because company provides cleaning services in Retail Company and offices. οAfter COVID most of the stores and offices are closed so company not able to provide cleaning services. As a result, it impact on the company performance in negative manner which is presenting in profit and loss statement. In this report consist of ratio analysis in order to analysis liquidity, solvency performance.
Part A From the calculations performed in the report of some of the financialratios,itcouldbeascertainedbyanalysingthe statement that the performance of BGC Ltd is declining and the reason behind this decrease is the covid β 19 situations. This has alsoledtodeclineintheefficiencyofthecompany.The following is the analysis of the ratios:
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Continueβ¦ οGross Profit Margin: From the calculation, it can be said that the GP of BGC Ltd has declined from 2020 to 2021 by approximately 3 %. In the year 2020, the margin was 6.81% and in 2021 it remained only 3.94%. οNet Profit Margin: The net profit margin of the business organisation is negative in the year 2021, which is -0.86 and in 2020 it is 1.91. On comparing with the gross profit margin, the net profit has declined majorly this is due to the change in the operating expenses. The rate of change is more as the change in the revenues. This is the reason of the negative net profit margin.
Continueβ¦ οReturn on Capital Employed: It is computed by subtracting the total assets from the current liabilities and then dividing the profit before interest and tax by the capital employed. The return has declined by around 10% which is a major decline in the ratio. οCurrentRatio:Inthisthecurrentassetsaredividedbythecurrent liabilities. This measures the liquidity position of the firm. The ideal ratio should be 2: 1. But it can be observed that the ratio is 2.24 in 2020 but in 2021 it has remained 0.96. With the decline in the profits, the impact has been also upon the liquidity position of the company and it is very crucial to enhance it
Continueβ¦ οWorking Capital Cycle: It is also known as the cash operating cycle. It means that in how much days approximately the operating cycle in turned. This shows the efficiency of the firm. But, as all the situation can be seen, it has also diminished. οGearing Ratio: The company is occurring more debt in comparison from the year 2020 in 2021. In 2020, the ratio was only 13.81% but the n it has increased to 29.14%. It means that the equity is declining and the firms borrowing has been increased. οInterest coverage Ratio: This ratio has also declined so much but it has declined to the decrease in the profit before interest and tax. The ratio in the year 2020 and 2021 was 22.75 and 2.04.
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Part B οA cash budget depicts a firm's predicted cash inflows more than a fixed period of time. It is a forecast of cash revenues anticipated in the coming so over budgeting process, as well as cash expenditures and the cash position with the firm at the conclusion of the time frame. οThe cash situation, on the other hand, can be determined relatively regularly,perhapsonceamonth,tomaintaintrackofthefirm's financial results.
Continue.. οThecashbudgetidentifiestheopportunitythattherevenueis extremely low, but if the administration wants to expand the company organization, it must concentrate on providing a constant other revenue or that it should expand at a set pace every month. Since a company's situation can become essential in the event of a market downturn, and in order to overcome that circumstance, the company is looking cash available to stay afloat in the global market. Furthermore, the purchase might be contingent on sales, as holding too much stock could result in wastage of materials and obsolescence if not delivered.
Part C οIf it is proposed that company switch to domestic cleaning, the market forecast for 2022 shows that the office boom will be 800, the static will be 375, and the recession will be 250. Domestic cash flow shows a boom of 1100, a plateau of 400, and a recession of -200. As a result, it suggests that the possibilities of a boom are 25%. The percentage of people who are in a state of stagnation is 35%, while the percentage of people who are in a state of recession is Based on the entire study, BGC Ltd should choose the second alternative, which is to shut down the retail component and focus on the domestic market.
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Conclusion οAs per the above report it has been concluded that company face various problems after COVID and has less liquidity and profitability. Company has prepared effective cash budget that present actual performance of company in which presents total cash inflow and cash outflow in effective manner. οCompany has to make effective policies to attract domestic market and generate revenues
References οLeistikow, D., Chen, R.R. and Xu, Y., 2022. Spot asset carry cost rates and futures hedge ratios.Review of Quantitative Finance and Accounting, pp.1-39. οLi, Z. and Gu, J., 2020, February. Research on Artificial Intelligence Cash Budget of Electric Power Enterprise Based on Evidence Reasoning. InThe International Conference on Cyber Security Intelligence and Analytics(pp. 308-314). Springer, Cham.