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Business Performance Analysis

   

Added on  2019-12-28

9 Pages3066 Words149 Views
Accounting and decisionmaking

TABLE OF CONTENTSINTRODCUTION...........................................................................................................................3Part 1: Business performance analysis.............................................................................................3Interpretation of statement of P&L.........................................................................................3Market segment analysis........................................................................................................4Part 2: Investment appraisal.............................................................................................................6Sources of internal finance.....................................................................................................7Part 3: Business report.....................................................................................................................8CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODCUTIONIt is very difficult to access business performance accurately merely by looking at valuesin the financial statements. In order to evaluate firm performance accurately ratio analysismethod is used by the managers. In this method ratio analysis technique is used to measure firmperformance and comments are done on same. Reasons behind firm performance in USA marketare also identified in the report. In end part of the report project evaluation method is used andviability of project is identified. Part 1: Business performance analysisInterpretation of statement of P&L Profitability ratioOn comparison of gross and net profit ratio of the firm it can be observed that value ofsame declined in the FY 2015 relative to FY 2014. Gross profit ratio of the firm declined from8.44% to 6.31%. It can be said that lack of control on direct expenses is one of the main reasondue to which direct expenses get declined (Allen, Qian and Qian, 2005). Net profit ratio of theBertie plc also get declined from 6.75% to 4.08%. This again reflect that firm does not havecontrol on indirect expenses and due to this reason net profit ratio of the firm also decline (Grossprofit ratio. 2015). Sales of the firm is consistently increasing then also decrease in both profitpercentage are validating the fact that lose control on expenses is one only reason due to whichfirm is earning less profit in the business (Brealey, 2012). Impact of increase in cost can be seenon the firm and its return on investment value decline sharply. In order to elevate profit levelfirm can adopt control methods and by doing so it can reduce its cost and can enhance profitlevel.Efficiency ratiosNet asset turnover indicate the efficiency with which firm is efficiently using its asset togenerate sales. If value of this ratio decline then it means that firm is not performing well. Valueof this ratio is declining in case of Bertie plc which means that firm is not using its assetseffectively to generate sales for the business (Petersen, 2009). Thus, firm needs to identify theway in which its assets like warehouse and machines are used to produce sale of the firmproduct. On the basis of analysis it can identify the best way in which assets can be used inbusiness. By doing so net asset turnover ratio value can be improved in the business.

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