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Financial Health of Sunbay Sales Assignment PDF

   

Added on  2021-05-27

6 Pages1096 Words68 Views
ContentsExecutive Summary.....................................................................................................................................2Evaluation and comparison of ratios...........................................................................................................3Profitability Ratios...................................................................................................................................3(a)Return on equity ratio..............................................................................................................3(b)Profit margin ratio...................................................................................................................3Liquidity Ratios........................................................................................................................................3(a)Current ratio............................................................................................................................3(b)Cash flow ratio.........................................................................................................................3Efficiency Ratios.......................................................................................................................................4(a)Assets turnover ratio...............................................................................................................4(b)Days debtors............................................................................................................................4Capital Structure......................................................................................................................................4(a)Debt to equity ratio.................................................................................................................4(b)Debt ratio.................................................................................................................................4Limitation of Ratio Analysis.........................................................................................................................4Conclusion...................................................................................................................................................4References...................................................................................................................................................5
Financial Health of Sunbay Sales Assignment PDF_1
Executive SummaryThis report is prepared for Karin Milson, on the financial health of Sunbay Sales. This report discussesthe various financial aspects including the profitability, liquidity, efficiency and capital structure. Thisreport is based on the data for the year ended 30 June, 2017.
Financial Health of Sunbay Sales Assignment PDF_2
Evaluation and comparison of ratiosRatios play an important role in interpreting the financial position and health of the business. These ratiosare mainly used by the management and stakeholders to analyses the business health and taking furtherdecisions. The main financial ratios are:(a)Profitability Ratio(b)Liquidity Ratio(c)Efficiency Ratio(d)Capital structureNow, lets discuss these ratios in detail:Profitability RatiosProfitability ratios are the financial ratios used to access, calculate and compare the profit earningcapability of the company. It includes comparing profits of the business, with expenses and other costs.The two such types of ratios are ("Profitability Ratios - Calculate Margin, Profits, Return on Equity(ROE)", 2018):(a)Return on equity ratio – This ratio shows the return received by shareholders on their amountinvested. This ratio is calculated by dividing profit with equity. This ratio shows the returnprovided by the company to its shareholders. In the given case, the company has a ROE of16.35%, which means that for every $100 invested by shareholders in the company, they aregetting a return of $16.35.(b)Profit margin ratio – This ratio shows the profit earned as a percentage of sales. In the givencase, the company is having a profit margin of 30.80% which means that against a sale of $100the company is making a profit of $30.80.Liquidity RatiosThese categories of ratios evaluate the liquidity performance of the company. This ratio measures thecompany’s ability to pay off its liabilities and debt obligations from the available resources. The two suchtypes of ratios are (Course, 2018):(a)Current ratio – Current ratio is current assets divided by current liabilities. This ratio measuresthe company’s efficiency to pay off its current liabilities from its current assets. In the given case,the company has a current ratio of 6.13 times. It means that the company’s current assets are 6times of its current liabilities and shows that the company is not utilizing its current assets meansresources efficiently as a company’s ideal current ratio should be 2:1.
Financial Health of Sunbay Sales Assignment PDF_3

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