Finance for Business: Financial Analysis, Cash Management, Sensitivity Analysis, Risk Identification, and Dividend Policy

Running head: Finance for business
Finance for business

Finance for business
Abstract
The aspects include in the financial analysis have been discussed in this report in the context of
Xero limited. In that, the company related information is discussed and with that, the financial
performance of the business is evaluated by using the ratio analysis. Then the analysis of
sensitivity has been undertaken in which the most sensitive element has been identified. The cash
management has been also used in the report in which all the securities which have been liquid
are considered. The systematic and unsystematic risks have been identified and reported in an
effective manner. The last part consisted of the dividend payout ratio which has been calculated
in relation to the past three years.
2

Finance for business
Table of Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................4
Financial analysis in the context of Xero Ltd..................................................................................4
Company's summary....................................................................................................................4
Ratio analysis...............................................................................................................................4
Analysis of Cash management.....................................................................................................7
Sensitivity analysis......................................................................................................................8
Systematic and un-systematic risk...............................................................................................9
Dividend payout ratio and dividend policy.................................................................................9
Recommendations..........................................................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
Appendix 1.....................................................................................................................................13
3

Finance for business
Introduction
The manner in which the company and its performance are to be evaluated will be discussed in
this report. There will be consideration of the ratio analysis in which the performance of the
company will be analyzed. The operations of the company will be identified and also the
advantages which are received by it in comparison to others will also be discussed. The test of
sensitivity for the net present value will be carried out and in that proper ascertainment of the
sensitive variable will be made. There will be the calculation for the payout ratio also by which
the amount that is distributed by the company will be taken into consideration. The involvement
of the risks will be made in which all types of risks will be considered.
Financial analysis in the context of Xero Ltd
Company's summary
Xero limited is the software company which provides the services in relation to the software. The
company is established in New Zealand and is involved in this business from 2006. There are
several subsidiaries which are consisted of this and all the operations are performed through
them (Xero Limited, 2016). The software Xero is the one in relation to which services are
provided and it is based on cloud-based accounting by the help of which connection is
established between the advisors and small businesses. The main services which are provided by
it include high tech, retail, legal, hospitality, construction, healthcare, manufacturing, and various
others.
The company enjoys various comparative advantages such as it focuses on small businesses and
provides the best services as it has all highly skilled employees (Bloomberg, 2019). It is
considered as the company with the highest innovative growth. Due to this, it is able to attract
more customers and attain the benefit of the same.
Ratio analysis
The company is required to analyze the performance on the regular interval and for that, there
will be the use of the ratio analysis. There will be the inclusion of the efficiency ratios and
profitability ratios under this as they are the most important to evaluate the overall financial and
4