Financial Evaluation and Budgeting in Finance

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Part 1: Financial Evaluation.......................................................................................................2
Part 2: Budgeting........................................................................................................................5
Part 3: Project Evaluation.........................................................................................................11
Reference and Bibliography:....................................................................................................17

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Part 1: Financial Evaluation
Particulars 2017 2016
Revenue € 7,85,000.00 € 7,22,200.00
Gross profit € 7,16,000.00 € 6,58,720.00
Net profit € 4,36,605.00 € 4,00,862.00
Total assets € 18,94,467.00 € 13,29,377.00
Total liabilities € 11,29,000.00 € 9,58,266.00
Total equity € 7,65,467.00 € 3,71,112.00
Interest € 8,500.00 € 8,000.00
EBIT € 6,80,200.00 € 6,24,710.00
Market value price per
share € 5.50 € 4.75
Number of shares 3,00,000 3,00,000
Profitability
Net profit margin 55.62% 55.51%
Gross profit margin 91.21% 91.21%
Asset Usage
Asset turnover ratio 41.44% 54.33%
Return on assets 23.05% 30.15%
Capital Structure ratio
Debt to equity ratio 1.47 2.58
Debt ratio 0.60 0.72
Interest coverage ratio 80 78
Investment ratio
Price earnings ratio 3.78 3.55
Earnings yield 0.26 0.28
Earnings per share 1.46 1.34
Commenting on the performance of the organisation:
After evaluating the above calculations the overall performance of the organization
can be derived this directly indicates the relevant improvements in their current operational
capability. From the evaluation of the profitability ratio, the net profit margin of the
organization is seen to improve slightly from the levels of 55.51% in 2016 to 55.62% in

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2017. This improvement is relatively due to the high level of net profit that has been achieved
by the company during the first year. Moreover, the calculation of gross profit margin
relatively indicates no certain improvements, as the value has relatively remained same for
both the fiscal years. This directly indicates that the reduction in administrative expenses has
relatively allowed the organization to experience higher profits from its operations (Vogel
2014).
The calculations of asset usage ratio directly indicate the low efficiency of the
management, which has relatively reduced the effective usage of the available assets. The
Asset turnover ratio of the organization has relatively fallen from the levels of 54.33% to
41.44% in 2017. In the similar instance, the overall return on assets of the organization has
also fallen from the levels of 30.15% to 23.05%. This decline in asset usage is relatively due
to the increment in total Assets of the organization in 2017, which was not complemented by
the increment in net profit and revenues.
The capital structure ratio of the organization as a relatively improve over the period
of two fiscal years, where the decline in debt accumulation has allowed the organization to
attend solvency position. The debt to equity ratio of the organization has a relatively declined
to the levels of 1.47 in 2017 from 2.58 in 2016. Moreover, debt ratio of the organization has
also declined from the levels of 0.72 in 2016 to 0.60 in 2017. The decline in both debt to
equity ratio and debt ratio is due to the increment in total equity, which was not
complemented by the increment in total liabilities of the organization. This relevantly helps in
improving the debt structure of the organization and reducing the composition of debt. The
interest coverage ratio of the organization is also increased from the levels of 78 to 80, which
directly indicates the positive attributes of the organization. Kou, Peng and Wang (2014)
stated that capital structure allow the investors to detect the solvency position of the
company, which helps them make investment decisions.