Analysis of Financial Performance of T-shirt Ltd

This report analyzes the financial performance of T-shirt Ltd using various ratios and balance sheet analysis. It also discusses the management of cash and monetary information.

Business finance
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Contents
Contents...........................................................................................................................................1
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
Analysis of financial performance of T-shirt Ltd........................................................................3
TASK 2............................................................................................................................................8
Brief explanation related with monetary information & management of cash of T-shirt Ltd.....8
About budget and its relevant techniques....................................................................................9
CONCLUSION..............................................................................................................................12
REFRENCES.................................................................................................................................12
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INTRODUCTION
Every business corporation need finance for successfully run their business activities. In
order to understand concept of business finance T-shirt Limited has been take. This report has
been define use of financial ratio for analysis business performance. Benefits of registered
organization in stock exchange as well as incorporate as public company in effective way.
TASK 1
Analysis of financial performance of T-shirt Ltd
Business organisations use effective financial management techniques which help in
analysing their business performance management department of T-shirt Limited apply ratio
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analysis through which they can able to understand impact of each and every item of balance
sheet on Profit generation as well as management of business Assets and liabilities (Komarova,
Tsvetkova, Kozlovskaya, and Pronkin, 2019).
Management department of T-shirt Limited on the basis of formulating their statement of profit
and loss can able to calculate their profitability as well as efficiency business ratios this will help
in providing a recognising their value of profit they can able to earn within a given time period.
Statement of profit and loss:
Profitability ratio: By using profit and loss statement T shirt Limited able to analyse and
profitability ratio this ratio has been calculated to recognise ability of organisation to generate
profit as well as recover their expenses by attending a higher rate of revenue please consider all
the essential ratios which include gross profit return of assets written off equity as well at net
profit ratio net profit ratio is calculated by excluding all the essential taxes and deducted all the
adjustments buy profitability ratio T- shirt Limited analyse their value of profitability within a
given time period
Gross profit ratio
Particular 2018 2019
Gross profit 1261 615
Sales 2101 1366
Gross profit ratio = GP/ Sales
*100
60.01% 45.02
Net revenue ratio
Particular 2018 2019
Net profit 372 -500
Sales 2101 1366
Net profit = NP/ Sales *100 17.07 -36.66
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Return on assets ratio
Particular 2018 2019
Net revenue 2101 1366
Total assets 1634 1700
ROA = Net revenue / Total
assets
1.28 0.8
Return on equity ratio
Particular 2018 2019
Net revenue 2101 1366
Shareholders equity 810 310
ROE = Net revenue/
Shareholder's equity
2.59 4.4
Interpretation:
By analysing all the essential profitability ratio it has been determined that value of gross
profit ratio in 2018 would be e better than 2019 as organisation able to general 60% off
profitability ratio and as compared to 2018 the value of profitability ratio will be decreases
organisation only generate 45% profitability ratio which means that they only able to generate
gross profit 45% of their and T-shirt Limited on the other side in 2018 the value of net profit
ratio calculated at 17.0 7% and in 2019 they generate high loss t-shirt Limited suffers from -
36.66 % of loss there value of profit on a set is also decrease as completed 2019 organisations
return on equity ratio will be determined as 2.59 % in 2019 and in 2019 it was 4.4 which means
that organisation me able to generate or provide invested equity in 2019 however they are not
properly manage their assets and cash does disappears from losses.
Balance sheet ratio: This statement is useful in determining value of organization by defining
and presenting essential information regarding asset and business liabilities. With the use of
balance sheet management department of T shirt Limited can able to recognize liquidity , as well
as investment ratio (Kayl, Zudina, Epinina, Bakhracheva, and Velikanov, 2017).
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Liquidity ratio: This ratio is used to determine liquid position an organization have to fulfil their
debt business liabilities
Current ratio
Particular 2018 2019
Current assets 352 426
Current liabilities 824 1390
Current ratio = CA/CL 0.42 0.3
Quick ratio
Particular 2018 2019
Quick assets 352-89 = 263 426 – 121 = 305
Current liabilities 824 1390
QR = Quick asserts / Current
Liabilities
0.31 0.21
Efficiency ratio: Theses ratio of balance sheet, managing department calculate this ratio for
determine efficiency rate for collecting cash as well as converting of stock in cash and payment
of business debt liability.
Stock turnover ratio
Particular 2018 2019
Cost of goods sold 840 751
Average inventory 89 121
Stock turnover = Cogs/
Average stock
9.43 6.2
Receivable turnover ratio
Particular 2018 2019
Net credit sale 2101 1366
Average account receivables 218 305
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Receivable turnover = Net
credit sales / Average
receivables
9.63 4.47
Capital gearing ratio
Debt ratio
Particular 2018 2019
Total debt 824 1390
Total assets 1282 1274
Debt ratio = Total debt / Total
assets
0.64 1.09
Debt to equity ratio
Particular 2018 2019
Total liability 824 1390
Value of total shareholder's
equity
810 310
Debt / Equity 1.01 4.48
Earning per share
Particular 2018 2019
Net revenue 2101 1366
Total number of share/ Value
of share
310 310
EPS = Net revenue/ Number of
share
6.77 4.4
Interpretation
By calculating balance sheet of T shirt limited it has been observed that The value of
stock turnover ratio in 2018 was 9.43 X and on comparison of 2019 it was 6.2 Times which
showcase that organisation required more time in 2018 as computer 2019 to convert their cash
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with stock with the cash on the other side received termination show different aspect of
organisation financial position the value of receivable turnover was 9.6 three days and as
compared to 2019 it was 4.47 days which means that debtors take more time in 2018 as
compared 2019 to to fulfil their debt liabilities by analysing Dept on death ratio it has been
increase in in 2019 which means that has completed 2018 Dept laboratory have more amount as
compared to equity of T-shirt Limited they are earning per share has also been more as compared
2019 in 2018 all these ratios interpreted that even through organisations are more profit in 2018
and their financial position is strong in this year however organisation due to increase in there
that liabilities able to fulfil their that within a given time period and customers also able to pay
their library within given time period as well as organisations name not able to generate profit in
this year but they can manage their assets as well as cash management policies (Bates, and
Robb, 2016).
T-shirt Limited has been given more time to their customers so they can able to fulfil their debut
liabilities within a given time period in 2018 this has been considered as 30 days and now they
are give me 60 days to their potential that are the main purpose of using this policy is that
maintain the position of in within the market and retain their potential business customer even to
organise a separate sperm loss but this will be useful and beneficial for their future business
policies this policy is directly influence customer to pay their that within a given time period and
short time period does the use they are also used cash policies and offer attractive discount
through which customer focus on are influenced to for their cash purchase from all of these
calculation it has been she is that even through t-shirt Limited profit get goes down but they used
effective Management Business policies for their future profits.
TASK 2
Brief explanation related with monetary information & management of cash of T-shirt Ltd
Accrual accounting versus Cash accounting: Accounting is essential concept of
organization. There will be two types of way which useful in recording transaction.
Accrual accounting: In this type of accounting concept it has been clear that organizations can
able to record transaction at the time when they accrued . In this type of accounting managers
record deprecation as well as amortisation and credit business transaction. This concept is based
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on the policy that every business activity is dual impact on organization books thus when they
accrue manager need to record at the time of reviving theses tractions.
Cash accounting: This concept is based on the concept or theory the only cash and it relevant
transaction has been record and when it occur or when customer given payment of their
purchase. Manager record transacting when there ill any cash inflow or outflow business activity
has been arrived (Cook, and Zavala, 2019).
Advantage of cash accounting
Easy concept: By applying cash accounting system for recording transaction is comparatively
easy .There
Present focus: The main advantage is that it consider only present entries. In cash accounting
manager does not include the impact of past offer future activities of business transactions.
Beneficial for small organizations: This types of cash accounting system is beneficial for sell or
micro business entities as their owners don’t have enough knowledge regarding accounting
standard.
Tax benefits: Business organization who adopt this model s only recorded cash relevant
transaction thus they get benefits during given tax liability.
Drawbacks
Lack of efficiency: This method is not universally accepted thus this is not guarantee to proved
accurate business result.
Limited use: Theses they of accounting method is only useful for small organization when
business entities engaged in international market applying this concept may become the reason
of suffers for high loss.
Benefit of accrual accounting:
Accurate business information: In this type of method all the transaction has been record and
their effect also considering while formulating financial statement .Thus applying this concept is
proved benefits and accurate business result to organizations.
Investor choice: Most of business organization choose this method fast it will useful in
considering essential adjustment which directly impact on future business earning.
Universally accepted: GAAP and international accounting organization convince other business
corporation to apply accrual accounting concept for maintain their business record.
Disadvantage
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Tax: Business corporations need to pay as comparatively high rate of tax due to using future
profits in financial statement (Chen, Chen, Yeh, and Tsaur, , 2016).
Accuracy: For recording business transaction expertise has been required which have knowledge
regarding every accounting standard norms.
Difference between profit & cash flow
Profit Cash flow
Profit is the overall revenue organization earn
after adjustment of every expenses.
This is the value of cash inflow business
activities
The computation of profit has been considered
after deduction of essential business expenses.
Value of total cash inflow activities
Management department formulate income
statement through which they can able to
recognize value of profit
Business Organization formulate cash flow
statements
This is the symbol and define for showing
growth of business.
Cash flow represent overall value of cash items
Profit is useful in attaining corporation goals Cash flow is use by organization to manage
their cash assets.
TASK 3
About budget and its relevant techniques
BUDGET: This is financial statement which is formulated to show the relevant business
result related with particular time period. On the basis of formulation of budget organization able
to generate and analyses their business profit for particular given time period.
No business organization can able to survive in market without formation of budget. As it proved
essential business information regarding future business possibilities and risk arias particular
time period. Following are the main requirement of formulation of budget for every business
corporation
Estimation of future earning: Budget is useful for identification and organise business earnings
bi formulation of budget t-shirt Limited able to identifying their future business and learning
which is generated from their particular business activities
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Communication device: Budget is treated as effective communication device as top management
of organisation use budgetary statement data as well as the budget to communicate their each and
every department and on the basis of that they formulate policies and Organisation department
work in according to achieve the budgeted outcomes (Freudenreich, Lüdeke-Freund, and
Schaltegger, 2020).
Useful in performance measurement: By using budget t-shirt Limited able to recognise their
performance by calculating and measuring differences between actual and mustard outcomes
organisation able to understand the level of their performance and ability of organisation
department to work in according to achieve their business goals is also useful for comparison of
past performance as well as competitive business Rival industries
Useful in decision making: Management of T shirt Limited use to formulate budget for taking
effective business decisions regarding their future business policies on the basis of budget they
identified risk and then they make business plan which help in reduction in losses and future risk.
Company finance
Benefits of formulate as public entity & registered in stock exchange
There will be various type of options personal have to register their business they have option to
start their business as partnership sole proprietorship limited liability partnership for as business
corporation there will be two types of Companies personal have to choose their or Run their
businesses as public limited or Private Limited public limited are those organisation which more
than 51% of shares are held by government for public and on the other side Private Limited of
those organisations which is registered as a company and which in which more than 51% of
shares are hold by or held by private Institutions or personal following are the advantage of
registered as public company.
Large source of finance: Benefit that an organisation achieve as public companies that they have
large source of finance due to their strong goodwill and registered as government company
financial institution easily provide them resources as well as they have huge financial resources
which help in maintain their position in market
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Benefits of tax: Public organisations are advantage of taxes as they have relief and various type
of compensation regarding tax liabilities does as compared to other setup public company need
to pay Limited tax liabilities
Government subsidiaries: Government to influence public to invest in public limited need to
provide various type of subsidiaries as well as financial assistant to public limited company
which is beneficial for them
Perpetual existence: The existence of public company e is remain constant still it is not winding
up by Legal procedure and till that even through the death of their owners or shareholders of the
company Run business with the market and its existence in show in as registered company
within the books of government
Limited liability: Liability of shareholders are limited to their shared values does holders need
not have risk regarding suffers from high loss (Oehler, Horn, Wendt, Reisch, and Walker,
2018).
Benefits of registered in stock exchange
Enhance goodwill: Registration within stock exchange useful in enhance goodwill of
organization. T-shirt Limited is listed within Britain Stock exchange.
Higher rate of profits: Investor get motivated towards invest their capital in those organization
which are registered within stock exchange. Listed business corporation also gerante more
profits as compare to non listed company.
High value of securities: Registered organization proved security regarding loss to investor.
Thus customers preference those business entities which are register in stock exchange.
T-shirt Limited is listed organization in Britain’s stock exchange it register as public company
which have take all the advantage of public company.
CONCLUSION
From the above analysis it has been analysis that by using various financial ratio
organization able to understand their financial performance of their corporation. When
organization registered as public company they get benefits of perpetual succession , limited
liability as well as though recourse of finance , they also get economic advantage of being
registered in stock exchange.
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REFRENCES
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educational systems and intelligence business systems in entrepreneurship
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Kayl, I. I., Zudina, E. V., Epinina, V. S., Bakhracheva, Y. S. and Velikanov, V.V., 2017.
Effective hr management as the most important condition of successful business
administration. In Integration and Clustering for Sustainable Economic Growth (pp. 23-
30). Springer, Cham.
Bates, T. and Robb, A., 2016. Impacts of owner race and geographic context on access to small-
business financing. Economic Development Quarterly, 30(2), pp.159-170.
Cook, M. and Zavala, E., 2019. The finances of a liver transplant program. Current opinion in
organ transplantation, 24(2), pp.156-160.
Chen, M.C., Chen, S.S., Yeh, H.M. and Tsaur, W.G., 2016. The key factors influencing internet
finances services satisfaction: an empirical study in Taiwan. american journal of
industrial and business management, 6(6), pp.748-762.
Freudenreich, B., Lüdeke-Freund, F. and Schaltegger, S., 2020. A stakeholder theory perspective
on business models: Value creation for sustainability. Journal of Business Ethics, 166(1),
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Oehler, A., Horn, M., Wendt, S., Reisch, L. A. and Walker, T .J., 2018. Young adults and their
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