Financial Ratio Analysis of Hendy Group Ltd

The given assignment requires analysis of the financial performance of Hendy Group Ltd by evaluating different types of ratios such as current ratio, quick ratio, inventory turnover, debtors' days, etc. The purpose is to understand the company's ability to pay off short-term loans and its efficiency in managing resources.

BUSINESS
RESOURCES

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Recruitment document used in a selected organisation....................................................1
P2 Employability, personal and communication skills..........................................................2
P3 Physical and technological resources................................................................................3
P4 Sources of internal and external finance...........................................................................4
P5 Interpret the contents of a trading and profit and loss account and balance sheet............6
P6 Use of budgets as a means of exercising financial control...............................................7
P7 Financial state of a given business....................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business resources are known as factors of production, consist of land and labour along
with capital and enterprise (Maglio and Spohrer, 2013). Everything represents as a business
resources from natural resources and farm products to machinery and office equipment. Business
resources also include employees, mentors and all of the business that support to supply chain.
To understand the concept of selected organisation Hendy group Ltd, it is operating as a dealer
of new and used vehicles. The company has been provided service plans, tires, accessories and
accident repair service. In the report consist of recruitment documentation, different types of
skills regarding to job role and main physical technology resources essential in the operation.
Apart from different types of resources related to finance and interpret contents of profit and loss
account and balance sheet of selected organisation. In addition, explain financial ratio of the
selected business.
MAIN BODY
P1 Recruitment document used in a selected organisation
Job Advert: Before placing a job advert, it is essential for HR managers of a company to
prepare job analysis process first. Here, they need to identify the number of vacant position at
workplace, eligibility criteria required to fulfil same and more. After preparation of such plan,
further they need to determine platform where job advertisement has to place. Generally in such
adverts, there is a description presented that includes company's name, vacant position, deadline
of application and pay scale. This would help candidates to measure their eligibilities as well.
Job Description: This document defines entire roles and responsibilities of a specified
vacant position including experience and other eligibility criteria required for the same. This
would help interested candidates to apply for job on given website.
Person Specification: Here, company provide a sample required for fulfilment of
specified position through which interested candidates can match their profiles and apply
accordingly for same.
Application form: It is provided to interested candidates who have applied for certain
job where they have to give details about their personal details
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P2 Employability, personal and communication skills
Employability skills – The particular skill can include expected qualification according
to job description and in the most of the job need to formal qualification. An applicant will be
required formal qualification in reference to job description. For example company wants to
sales manager so applicant have formal qualification of MBA in sales.
It is important for specific job because it shows learning power and qualification of
particular person. On the behalf of the skill select that person.
Personal skills – It is important part because it can present a person in effective manner
and show their
 Soft skills – In the soft skill make good employee and present their skills such as
listening, communication and etiquette.
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 Hard Skills – The hard skill can use to analysis and measure personality of applicant in
manner to maths, reading and writing.
It is important for job because as a sales manager many time a person become soft and
may times become soft. So in the field need to both types skills.
Communication Skills – It is vary important skill where interviewer judge their
communication skills and their effectiveness regarding to presentation. In the sales field it is
more important to present their product in front of customer.
 Verbal communication – Through verbal communication communicate with customer
and define about their product (Williams, 2014). There are defined two main types of oral
communication these are – (1) Storytelling – It is consider as form of verbal
communication which can help in the construction of common meanings for the
individual in an organisation. (2) Crucial conversation – The particular process is similar,
reflection and planning for high stakes communication in comparison to daily
interactions at work. And other forms face to face video conferencing, voice chat and
phone.
 Non verbal communication – In this communicate with expression where deaf and dumb
people easily understand about their product. The forms of non verbal communication (1)
Paralanguage – In this way something is said instead of what is said actually. (2) Visual
communication – It takes place with the help of visual like colour, graphic design.
P3 Physical and technological resources
Physical resources – These type resources are used to conduct business and provide
different types of products and services. To conduct different types of activities provide support
to action of the Hendy group Ltd. There are included most common physical resources these are
-
 Human resources – These are part of organisation that can help to conduct operation
activities in effective manner. In the Hendy group Ltd have about 4500 employees who
can work in efficient manner.
 Building and facilities – At Hendy group Ltd have about many vehicles which can
provide facility to people to buy any where. They have many stores in UK into local
areas.
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Technological resources – These resources are mainly conduct operations and activities
with the help of different types of technology. There are mainly consist of different technological
equipment which can help to manage all operations.
 Computer based resources – These resources are arrange in effective manner and provide
all appropriate things which can help to run smoothly business activities. For example –
Hardware, software, documentation.
 Software and ICT – There are most of the officers need to telephone, wifi, chair, desk and
storage for their equipment. Technological resources can help to fulfil the requirement as
per demand.
 Maintenance and security – The company has been planned to provide best experience in
reference to their customers and on the time of festival provide too much security at their
store. To maintain of their resources keep monitor through security guard as well as
CCTV camera.
P4 Sources of internal and external finance
Business can not survive without money so operate business act ivies need to funds
which is getting from different sources. These are categorised into two sources, external sources
and internal sources. In internal sources includes sales of fixed assets, debt collection, retained
earnings, personal savings and in external sources includes trade credit, hire purchase, bank loan,
overdraft, mortgage (Sahut and Peris-Ortiz, 2014) .
Internal sources – These sources of finance are generated with in the business from the
existing assets or activities. There are defined advantage and disadvantage of different types of
internal sources of fund -
Retained Earnings – It is part of internal sources of finance and defined as the profit left
after paying a dividend to the shareholders or drawings by the capital owners of Hendy group
Ltd. Advantage – There is no need to issue additional equity an there is no dilution to control
in reference to their ownership. Disadvantage – In practical way there no disadvantage regrading to generate retained
earnings.
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Sales of fixed assets – When company needs to funds that time sale out old assets to
generate fund from their internal sources. The company Hendy group Ltd has been sale out their
old assets which can not use for office work. Advantages – It can work as a short term and long term finance which is related to sale of
fixed assets. After regularly of screen of fixed assets identify in books which are no
longer use should be sold out as early as happens.
 Disadvantages – When the assets are sold before use properly their useful life and it can
lose their services.
External Sources – It can apply in an organisation to arrange of capital and funds from
different sources which is related to outside of business.
Bank Loan – It is the most common form which is applied by every organisation in
effective manner. In reference to Hendy group Ltd contact to bank and set particular time period
regarding to repayment of loan and rate of interest. Advantage – They would provide loan on time if the their business plan according to their
rules and regulation. Bank understand strategy regarding to business and satisfy that in
future company has been paid their loans on time. Disadvantage – the business would pay back require hight rate of interest and if business
does not have sufficient amount to pay back bank loan that time they can sale out their
properties and take their amount (Popovič and et.al, 2018).
Hire Purchase – It is a system where business have to paid set amount in instalments to
use particular assets. In the context of Hendy group Ltd has been used to particular source to
increase their profitability. Advantage – With the help of this source business can pay in instalment to that person
who give assets to company. It can help to increase net worth and able to continue using
to pay for particular product.
 Disadvantage - The company has paid amount in monthly basis which can use one item.
Some times it can not provide worth so instead of purchase new assets which is cheaper
rather than to hire for Hendy group Ltd.
P5 Interpret the contents of a trading and profit and loss account and balance sheet
Financial statements are reports which is prepared by finance department of the company
to present financial performance in effective manner in front of top management. In financial
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statement includes profit and loss statement, balance sheet and cash flow statement. The purpose
of financial statements to record all transactions which is related to day to day activities. It can
help to track daily routine activities and know ability of company regarding to cash and the
sources ans uses of the cash. Analysis to capability pay back their debts to identify condition of
the Hendy group Ltd. In reference to Hendy group Ltd there are defined Profit and loss statement
and balance sheet in detailed information.
The income statement is one of the important statement and kind of financial statements.
It can present how much net profit earn by company in particular accounting period. In the
statement record all expenses and income after than from income less amount of expenses
remaining amount known as net profit (Bajomi-Lázár,2014) . The purpose of prepare income
statement to provide all detailed information to management of Hendy group Ltd and they will
take appropriate information as per situation. The main purpose to provide accurate financial
information in reference to financial earning performance.
 Sales – In 2017 company has been sold out about 550000 nu t in 2018 it increased by
50000. It is beneficial for company because every company wants to more sales to
generate profit.
 Cost of Sales – There are comparing cost of sales of 2018 with 2017 so it is getting that
in 2017 it was 125000 and in 2018 it was 220000. It means it is increasing by 95000.
 Gross profit – Due to increase of cost of sales decrease amount of gross profit so it is
identified that it was decreasing as compare to 2017. In 2017 amount of gross profit
425000 but in 2018 it was 380000. Gross profit beneficial and show performance of the
company in effective manner.
 Net Profit – It can present financial performance of the company and in 2017 company
generate 264000 in 2017 but in 2018 it came down, earn 184000 due to increase of cost
of sales. Through net profit calculate financial situation of company and on the basis
taken investing decision so it is very important for each company.
The balance sheet is a part of financial statement which contains assets and liabilities of
company and also shareholders equity in reference to Hendy group Ltd in particular time period.
It can provide a basis of computing rates of return and analysing of capital structure. It is based
on the fundamental equation which is Assets = Liabilities + equity. It is important to prepare for
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every organisation because it can present actual situation of a company and purpose of prepare to
arrange all liabilities and assets in effective manner (Harris, Gibson and McDowell, 2014) .
 Assets (include tangible and intangible assests) – It also known as fixed assets where
including tangible and non tangible assets. The amount of tangible assets 15000 (office
equipment) and intangible assets 7000. If company have much more assets and can not
utilised in any work so it is not good and work as wastage. But company can utilise all
types assets so it will present good presentation.
 Current assets – In the Hendy group Ltd includes current assets cash in bank, debtors ans
stock respectively 300000, 15000 and 50000. Much more current assets reason of
liquidity and these are convert less than 12 months so company have limited current
assets and manage liquidity.
 Liabilities – There are including current liabilities and long term liabilities.
 Current liabilities – In this section of the company Hendy group Ltd includes short term
creditors (60000) and directors loan (80000).
 Long term liabilities – In the balance sheet of the company include long term creditors
which was 43000.
 Net assets – From assets less current liabilities and long term liabilities remain balance of
net assets which was 183000.
 Owner's equity (Share capital) – The company have about 2000 share capital.
P6 Use of budgets as a means of exercising financial control
In every organisation need to planning and control which can help to gain much more
profitability in future. To conduct any task need to proper planning than controlling of different
activities of the business. In reference to Hendy group Ltd has applied two methods which can
help to control financial activities these are -
 Break even Analysis – It is a financial tool which can provide accurate situation and
level regarding to their products and services. Break even analysis provide that particular
point where company get no profit and no loss (Patton, 2014) .
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From the above chart it has been analysed that Fixed cost of the Hendy group Ltd remain
same at the point of 5000 but total cost and variable cost changes according to marketing
activities and at the point of 550 where company get no profit and no loss.
The advantage of break event analysis that it provides no loss and no profit situation and
disadvantage that company needs to profit to survive into market.
 Budgeting – It is a process of estimate income and expenses for potential time period. It
can help to planning about business activities and management can follow the budgeting
plan and according to that control on each activities. In the Hendy group Ltd prepare
different types of budgets like master budget, cash budget, static budget, flexible budget
and many others.
To prepare budget firstly need to analysis of all departments and estimate related income
and expenses. In the budget identify problems that at the time budgeting can not estimate
properly after that company can not control all activities in effective manner (Ghanbari and et.al,
2017) .
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P7 Financial state of a given business
The financial accounting ratios compare of two year ratio to present financial situation of
the particular company. With the help of these ratio analysis the performance and compare with
last year activities. It is important for Hendy group Ltd because company get all accurate
financial information in appropriate manner. These financial ratios are divided into these
categories -
Profitability Ratios – These ratios are a class of financial metrics where investors and
analyst can measure and analysis the ability of company. It can define how much company
generate profit which is related to operating costs, shareholders equity and balance sheet assets in
the accounting period. There are considering different types of ratios which are -
 Gross Profit margin – It can present Net sales and gross profit of the company in effective
manner. Gross profit margin = Gross profit/Net sales*100
 Net profit margin – The formula of net profit margin = Net profit/net sales*100
The particular ratio important for Hendy group Ltd because it can provide profitability of
company and know performance to present in front of investors, creditors and others. So it is
important to know ability.
Liquidity ratios – This ratio present liquidity in the organisation ad ability to pay back of
debt. Liquidity ratio an show how much cash in hand of the Hendy group Ltd.
 Current ratio – The particular ratio can based on the current assets and current liabilities.
The particular formula to present current ratio – Current assets/current liabilities
 Quick ratio – This ratio based on the quick assets and current liabilities. Here in preset
formula to calculate quick ratio = Quick assets/Current liabilities.
With the help of particular ratio analysis of liquidity of Hendy group Ltd because to pay off
short term loan need to cash. If company have much more liquidity so it will manage and reduce
it.
Performance Ratio = The particular ratio can present performance of the company on
the basis of stock turn over and debtors turn over basis (Dudin and et.al, 2015).
 Inventory turn over – It is calculated to know in how many time period Inventory survive
by company in effective manner.
 Debtors days – Here define about to collection time period regarding to debtors.
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The particular ratio are presented performance and help to decision making process of
management. Through these ratio know debtors turn over as well as inventory turn over and
analysis days to recover.
CONCLUSION
As per the above report it has been concluded that in every business need different types
of resources which can help to conduct different business activities in effective manner. There
are technology resources and physical resources both the important for an organisation. To
evaluate the financial performance of the company prepare financial statement and understand
financial ratios.
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REFERENCES
Books and Journals
Maglio, P. P. and Spohrer, J., 2013. A service science perspective on business model
innovation. Industrial Marketing Management. 42(5). pp.665-670.
Williams, D. A., 2014. Resources and Business Failure in SMEs: Does Size Matter?. Journal of
Business and Management. 20(2). p.89.
Sahut, J. M. and Peris-Ortiz, M., 2014. Small business, innovation, and entrepreneurship. Small
Business Economics. 42(4). pp.663-668.
Popovič, A. and et.al, 2018. The impact of big data analytics on firms’ high value business
performance. Information Systems Frontiers. 20(2). pp.209-222.
Bajomi-Lázár, P., 2014. Party Colonisation of the Media in Central and Eastern Europe:
Modern Business Decision Making in Central and Eastern Europe. Central European
University Press.
Harris, M. L., Gibson, S. G. and McDowell, W. C., 2014. The impact of strategic focus and
previous business experience on small business performance. Journal of Small Business
Strategy. 24(1). pp.29-44.
Patton, D., 2014. Realising potential: The impact of business incubation on the absorptive
capacity of new technology-based firms. International Small Business Journal. 32(8).
pp.897-917.
Ghanbari, A. and et.al, 2017. Business development in the Internet of Things: A matter of
vertical cooperation. IEEE Communications Magazine. 55(2). pp.135-141.
Dudin, M. an et.al, 2015. The innovative business model canvas in the system of effective
budgeting. Asian Social Science, 11(7). pp.290-296.
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