Financial Statement Analysis (FSA) Assignment
Added on 2020-05-11
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RUNNING HEAD: Financial analysis of Company1Name of the student-Topic - Financial analysis of CompanyUniversity name-
Financial analysis of Company2Executive summary This report is prepared with a view to analysis the financial problems and financial decision making process of the investors. There are several financial tools such as ratio analysis, capital budgeting tools, NPV, IRR and bottom up analysis. These financial tools are used to evaluate the financial problems and identify the best suitable course of action to make effective use of resources. It is evaluated that if company wants to discontinue its business then it should consider all the internal and external factors such as its opportunity cost, investment capital and loss to the organization. This report has reflected how organization should take investment decision to create value on the invested capital. In addition to this, another part of the report divulges the key financial performance of JB Hi-Fi Company throughout the time. It will give brief idea to investors about how they could create value on their investment if they invest their money in JB Hi-Fi Company.
Financial analysis of Company3Table of ContentsExecutive summary..............................................................................................................2Introduction.........................................................................................................................4Question-1...........................................................................................................................5Answer to question no-a.................................................................................................5Answer to question- b.....................................................................................................7Question no-2......................................................................................................................9Introduction.........................................................................................................................9Present description of company..........................................................................................9Financial analysis of the JB HI-FI company....................................................................10Recommendation..........................................................................................................16Finding and conclusion..................................................................................................17References.........................................................................................................................19Appendix............................................................................................................................22
Financial analysis of Company4Introduction With the ramified economic changes and complex business structure, each and every organization is making effective efforts to increase their overall earning. It is considered that investors are more inclined towards investing their capital in company which provides short termand long terms benefit to them at large. In the first part of the report, costing methods and decision making to continue or discontinue particular project has been taken into consideration. It is evaluated that management is in the mist to decide whether continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. Therefore, costing technique has been used to make effective decision making. It is evaluated that if company could gauge the possibility of short term and long term debts then it will increase the overall productivity and earning of company. In addition to this, continue and discontinue of the business is totally depends upon the contribution margin of company. If company is having positive contribution margin in its value chain activities then it should surely continue its business operation even if it is showing negative output in its business. The second part of the report is based on the financial analysis of the business functioning of company. This report has reflected the key understanding on the financial analysis of the company. In this report, financial analysis tools such as Ratio analysis, top down analysis and bottom up analysis have been used to gauge the performance of company. This part of the report is based on the company name JB HI FI Company. It is the listed company running its business on international level. It is considered that if investors want to make create value on his investment capital then they needs to invest their money in value created company.
Financial analysis of Company5Question-1Answer to question no-aIn this part of the question, there are following points are undertaken which are given as below All the production fixed cost has been allocated in different department on the basis of sales.If production of round trampolines is stopped then equipment engaged in this will be of no use.If production of round trampolines is stopped then there will be saving of line supervisor’s salary.Company has no other use of these assets and working capacity to produce other things. Therefore, it will be loss for the business if they discontinue production of round trampolines.These are the above factor which needs to be taken into consideration while undertaking the production. After evaluating the various factors and key contribution factors in this part, it is considered that round trampolines production is not profitable and not creating value for the capital engaged in business. Therefore, it could be determined that management department should stop the production of round trampolines at large. If management department of company consider the other factors such as production capacity, opportunity cost then there will be following recommendations.
Financial analysis of Company6It is considered that if management department will stop the production of round trampolines then it will result to saving of only line supervisor’s salary. In addition to this, management department has to bear other losses like general factory overhead, depreciation and advertisement expenses. Even if, company stops its production of round trampolines, it willresult to loss of 5, 11,000. This is the actual loss and company could save only 19,000 after discontinue business. Income/Expenses Total, RMRound, RM Traingular, RM Square, RMSales 1,000,000140,000500,000360,000Less: Variable expenses-410,000-60,000-200,000-150,000Contribution margin 590,00080,000300,000210,000After evaluating the details and data of these round trampolines, it is considered that contribution margin of company is positive and showing 5, 90,000 amount of profit margin. It shows that company has high amount of profit from its total sales of round trampolines. In addition to this, if management department discontinue its business then it will have to bear the following losses.Advertising 216,00041,000110,00065000Depreciation 95,00020,00040,00035,000Line supervisor’s salary 19,0006,0007,0006,000Gen. factory overhead* 200,00028,000100,00072,000Total fixed expenses-530,000-95,000-257,000-1780000LessLine supervisor's salary19,0006,0007,0006,000Total loss still face by company-511,000-101,000-264,000-172000
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