Financial Analysis of Icelandic Firm
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This assignment delves into the financial health of an Icelandic firm. Students analyze the company's capital structure, examining the use of equity versus debt financing. They then evaluate key profitability ratios to assess the firm's financial performance over two fiscal years (2015 and 2016). The analysis aims to determine the most suitable source of capital for the firm's expansion plans and its overall financial strength.
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MANAGING FINANCIAL
RESOURCES AND DECISIONS
1
RESOURCES AND DECISIONS
1
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Financing sources which are available for an enterprise.......................................................3
1.2 Assessing implications of financing sources.........................................................................3
1.3 Evaluation of suitable financing source.................................................................................4
TASK 2............................................................................................................................................4
2.1 Cost of identified sources of finance.....................................................................................4
2.2 Significance of financial planning.........................................................................................5
2.3 Assessing information which are needed to take financing decisions...................................5
2.4 Influence of financing sources on financial statements.........................................................5
TASK 3............................................................................................................................................6
3.1 Projected cash budget............................................................................................................6
3.2 Computing units cots and price..............................................................................................6
3.3 Assessing investment appraisal techniques...........................................................................7
TASK 4............................................................................................................................................9
4.1 Key aspects of different financial statements........................................................................9
4.2 Comparison between financial statements.............................................................................9
4.3 Assessing business performance of Sainsbury’s Plc using financial ratios.........................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Financing sources which are available for an enterprise.......................................................3
1.2 Assessing implications of financing sources.........................................................................3
1.3 Evaluation of suitable financing source.................................................................................4
TASK 2............................................................................................................................................4
2.1 Cost of identified sources of finance.....................................................................................4
2.2 Significance of financial planning.........................................................................................5
2.3 Assessing information which are needed to take financing decisions...................................5
2.4 Influence of financing sources on financial statements.........................................................5
TASK 3............................................................................................................................................6
3.1 Projected cash budget............................................................................................................6
3.2 Computing units cots and price..............................................................................................6
3.3 Assessing investment appraisal techniques...........................................................................7
TASK 4............................................................................................................................................9
4.1 Key aspects of different financial statements........................................................................9
4.2 Comparison between financial statements.............................................................................9
4.3 Assessing business performance of Sainsbury’s Plc using financial ratios.........................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
2
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INTRODUCTION
Finance is an aspect of the firm which helps to entrepreneur to exist in the industry or
market. Along with this, it is compulsory to take effectual business decisions in order to increase
financial health of it. The current study is based on Iceland limited company which operates in
retail sector or segment of UK at small level. The present report emphasises on various financing
sources which helps to raise capital for business expansion. Further, it focuses on cash budget as
well as unit cost along with investment appraisal methods. It looks upon financial performance
of Sainsbury Plc from accounting period 2015 to 2016.
TASK 1
1.1 Financing sources which are available for an enterprise
In the present case Iceland limited is going to undertake a project for which it needs
finance. There are various sources of finance among them some are explained as below:
For Incorporated or partnerships:
Equity shares: In such type of source Iceland limited issue shares in the market with help
of stock market and these are purchased by shareholders (Zhao and Chu, 2016). The
amount of purchasing is to be used in the firm for expansion.
Bank loan: As per this, bank provide sum of money which is known as bank loan. It is
easy and short process compare to equity but cost of bank loan is comparatively higher.
Further, bank provide fund to Iceland limited after valuation of it in industry.
Government grants: It is referred as financial award which is considered as eligible
grantee. Government grants are not expected to be repaid and do not include technical
assistance or other financial assistance.
Debentures: It is considered as debt instrument which is not secured in terms of physical
assets. It is also presented as reputation of issuer. It is mainly issues as a type of bond to
secure capital.
3
Finance is an aspect of the firm which helps to entrepreneur to exist in the industry or
market. Along with this, it is compulsory to take effectual business decisions in order to increase
financial health of it. The current study is based on Iceland limited company which operates in
retail sector or segment of UK at small level. The present report emphasises on various financing
sources which helps to raise capital for business expansion. Further, it focuses on cash budget as
well as unit cost along with investment appraisal methods. It looks upon financial performance
of Sainsbury Plc from accounting period 2015 to 2016.
TASK 1
1.1 Financing sources which are available for an enterprise
In the present case Iceland limited is going to undertake a project for which it needs
finance. There are various sources of finance among them some are explained as below:
For Incorporated or partnerships:
Equity shares: In such type of source Iceland limited issue shares in the market with help
of stock market and these are purchased by shareholders (Zhao and Chu, 2016). The
amount of purchasing is to be used in the firm for expansion.
Bank loan: As per this, bank provide sum of money which is known as bank loan. It is
easy and short process compare to equity but cost of bank loan is comparatively higher.
Further, bank provide fund to Iceland limited after valuation of it in industry.
Government grants: It is referred as financial award which is considered as eligible
grantee. Government grants are not expected to be repaid and do not include technical
assistance or other financial assistance.
Debentures: It is considered as debt instrument which is not secured in terms of physical
assets. It is also presented as reputation of issuer. It is mainly issues as a type of bond to
secure capital.
3
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Bank overdraft: It is a situation in which money withdrawn and available balance in bank
marked as zero. If any kind of agreement is signed with holder then it will limit the
overdraft and interested is being charged.
Venture capitalist: It is referred as investor who focuses mainly on funds providing
activities to start a new venture. By having an improved focus on such values the new
business aspects can be advanced effectively.
Leasing: It is contract which is being highlighted in terms under which rent property is
owned by another party. In this, tenant holds the accountability to access asset and
guarantees the lessors.
Hire purchase: It is a method of buying goods through which installment payments is
being made for some time.
Commercial paper: It is unsecured and short term debt which is issues by a corporation.
It is mainly a financing of accounts receivables, investors, etc.
Factoring: Financial intermediary is a aspect which is being referred as purchase
receivables from a company. It is funding source that agrees to provide value of invoice
less a discount for commission.
For Unincorporated or sole traders:
Sale of assets: It is a state in which organization assets are being sale to another party by
the bank. It is mainly taken into account at time of loan repayment issues.
Borrowing from friends and family: It is referred as factor in which friends and family
offers a financial sources in terms of sole traders. It is significant to ensure about pros and
cons of borrowing.
Retained profit: It is internal source where the sum of money which is remaining after
provide dividend to shareholders is to used for financing the project.
1.2 Assessing implications of financing sources
Source of Implication in terms of Implication in terms Dilution of control
4
marked as zero. If any kind of agreement is signed with holder then it will limit the
overdraft and interested is being charged.
Venture capitalist: It is referred as investor who focuses mainly on funds providing
activities to start a new venture. By having an improved focus on such values the new
business aspects can be advanced effectively.
Leasing: It is contract which is being highlighted in terms under which rent property is
owned by another party. In this, tenant holds the accountability to access asset and
guarantees the lessors.
Hire purchase: It is a method of buying goods through which installment payments is
being made for some time.
Commercial paper: It is unsecured and short term debt which is issues by a corporation.
It is mainly a financing of accounts receivables, investors, etc.
Factoring: Financial intermediary is a aspect which is being referred as purchase
receivables from a company. It is funding source that agrees to provide value of invoice
less a discount for commission.
For Unincorporated or sole traders:
Sale of assets: It is a state in which organization assets are being sale to another party by
the bank. It is mainly taken into account at time of loan repayment issues.
Borrowing from friends and family: It is referred as factor in which friends and family
offers a financial sources in terms of sole traders. It is significant to ensure about pros and
cons of borrowing.
Retained profit: It is internal source where the sum of money which is remaining after
provide dividend to shareholders is to used for financing the project.
1.2 Assessing implications of financing sources
Source of Implication in terms of Implication in terms Dilution of control
4
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finance financial of legal
Equity shares In this Iceland limited
company has to provide
dividend to stockholders
which lead to impact on
profitability.
Iceland limited firm
must listing the firm in
stock market and then
it can issue shares and
raise fund (Osei-
Assibey, 2013).
Diluted with
shareholders.
Bank loan Here management has to
pay interest amount to
bank from profit by which
net profit affects.
While taking bank
loan Iceland limited
has to show profit
level and various
financial statements to
determine valuation of
it.
Very low
Retained profit Being an internal source
there are not any financial
impacts are there.
Due to internal source
there are any legal
rules are not imposed.
No
Government
grants
In this, company need to
provide detailed financial
statement structure to
government.
Papers and proposal in
respect to funds
allocation must be
presented.
No
Debentures Usually secured against the
asset being invested
Prior agreement is
required to meet
standards.
Very low
Bank overdraft Help a business flatten
seasonal dips in cash-flow
In this, legal
agreement is signed
between parties for
long term solution
No
Venture In this, funds are being Legal acceptance is Very low
5
Equity shares In this Iceland limited
company has to provide
dividend to stockholders
which lead to impact on
profitability.
Iceland limited firm
must listing the firm in
stock market and then
it can issue shares and
raise fund (Osei-
Assibey, 2013).
Diluted with
shareholders.
Bank loan Here management has to
pay interest amount to
bank from profit by which
net profit affects.
While taking bank
loan Iceland limited
has to show profit
level and various
financial statements to
determine valuation of
it.
Very low
Retained profit Being an internal source
there are not any financial
impacts are there.
Due to internal source
there are any legal
rules are not imposed.
No
Government
grants
In this, company need to
provide detailed financial
statement structure to
government.
Papers and proposal in
respect to funds
allocation must be
presented.
No
Debentures Usually secured against the
asset being invested
Prior agreement is
required to meet
standards.
Very low
Bank overdraft Help a business flatten
seasonal dips in cash-flow
In this, legal
agreement is signed
between parties for
long term solution
No
Venture In this, funds are being Legal acceptance is Very low
5
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capitalist allotted to Iceland on the
basis of venture financial
risk
being taken into
account on the basis of
terms.
Leasing In this, financial terms are
based upon on time period
of lease on mutual
understanding.
Legal norms are being
employed on the basis
of property legislation.
No
Hire purchase It provides an appropriate
learning in regard to
installment cash statements
In this, proper
documentation is
required in order to
approve hire purchase
Yes
Commercial
paper
It demands an application
of commercial standards in
respect to fund allocation.
It requires an effective
consideration of
mutual understanding
with Iceland firm and
sources.
Very low
Factoring Company outsourcing its
invoicing arrangements to
an external organization
It demands a control
system to boost legal
values.
Very low
Sale of assets It advances the long term
sustainability in terms of
funds.
Iceland must focus on
sales agreement to
meet the legal values.
No
1.3 Evaluation of suitable financing source
For raising finance for undertake project equity share is most suitable for Iceland limited
organisation where it has too listing the firm in stock market. It is easy method and cost of
finance is low as compare to bank loan. Further, by using this more number of shareholders are
attracted which lead to enhance capital in the firm (Engel, Fischer and Galetovic, 2013).
However, when go through equity shares then it is necessary to listing entity in stock market
otherwise it cannot raise fund.
6
basis of venture financial
risk
being taken into
account on the basis of
terms.
Leasing In this, financial terms are
based upon on time period
of lease on mutual
understanding.
Legal norms are being
employed on the basis
of property legislation.
No
Hire purchase It provides an appropriate
learning in regard to
installment cash statements
In this, proper
documentation is
required in order to
approve hire purchase
Yes
Commercial
paper
It demands an application
of commercial standards in
respect to fund allocation.
It requires an effective
consideration of
mutual understanding
with Iceland firm and
sources.
Very low
Factoring Company outsourcing its
invoicing arrangements to
an external organization
It demands a control
system to boost legal
values.
Very low
Sale of assets It advances the long term
sustainability in terms of
funds.
Iceland must focus on
sales agreement to
meet the legal values.
No
1.3 Evaluation of suitable financing source
For raising finance for undertake project equity share is most suitable for Iceland limited
organisation where it has too listing the firm in stock market. It is easy method and cost of
finance is low as compare to bank loan. Further, by using this more number of shareholders are
attracted which lead to enhance capital in the firm (Engel, Fischer and Galetovic, 2013).
However, when go through equity shares then it is necessary to listing entity in stock market
otherwise it cannot raise fund.
6
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TASK 2
2.1 Cost of identified sources of finance
Equity shares: While raising fund from equity then the Iceland has to pay cost of finance in
terms of dividend amount to the shareholders. Hence, here financing cost of respective source is
dividend amount which is given from the net profit generated by it.
Bank loan: Further, financing cost of bank loan is in terms of interest amount which is imposes
by the commercial bank on Iceland. Cost of finance of bank loan is higher as compare to equity
shares (Minsky, 2015).
Retained profit: It is an internal financing source in which any kind of cost or expenses are not
there which has to be paid by Iceland.
2.2 Significance of financial planning
Financial plan is highly important for each and every company in order to manage
financial resources and make the firm financially sound up to higher extent. Using the plan
management able to prepare budget for current and next fiscal year and make appropriate
business strategies. Apart from this, Iceland Limited can easily allocate financial resource to
different organizational functions in adequate manner. In the Iceland if such resources are not
allotted adequately then overall smooth functioning of it affects negatively (Hyman, 2014).
Financial plan helps to the management in order to utilize available financial resources in
efficient way by which Iceland can become more productive in the retail industry. Hence, it can
be assessed from this that planning for financial is highly significant for it.
2.3 Assessing information which are needed to take financing decisions
When any financing source going to provide capital or fund to the company such as
Iceland then it needs to take various information and appropriate data by which it can take better
decision. The informations which it should take are such as profit level, liquidity position as well
as different investor ratios. When it has higher profit and liquid position then Iceland able to
meet with obligations effectually. In addition to this, in terms of bank loan the commercial banks
require to assess business valuation and analyse financial statements also (Holroyd and et.al.,
2014).
7
2.1 Cost of identified sources of finance
Equity shares: While raising fund from equity then the Iceland has to pay cost of finance in
terms of dividend amount to the shareholders. Hence, here financing cost of respective source is
dividend amount which is given from the net profit generated by it.
Bank loan: Further, financing cost of bank loan is in terms of interest amount which is imposes
by the commercial bank on Iceland. Cost of finance of bank loan is higher as compare to equity
shares (Minsky, 2015).
Retained profit: It is an internal financing source in which any kind of cost or expenses are not
there which has to be paid by Iceland.
2.2 Significance of financial planning
Financial plan is highly important for each and every company in order to manage
financial resources and make the firm financially sound up to higher extent. Using the plan
management able to prepare budget for current and next fiscal year and make appropriate
business strategies. Apart from this, Iceland Limited can easily allocate financial resource to
different organizational functions in adequate manner. In the Iceland if such resources are not
allotted adequately then overall smooth functioning of it affects negatively (Hyman, 2014).
Financial plan helps to the management in order to utilize available financial resources in
efficient way by which Iceland can become more productive in the retail industry. Hence, it can
be assessed from this that planning for financial is highly significant for it.
2.3 Assessing information which are needed to take financing decisions
When any financing source going to provide capital or fund to the company such as
Iceland then it needs to take various information and appropriate data by which it can take better
decision. The informations which it should take are such as profit level, liquidity position as well
as different investor ratios. When it has higher profit and liquid position then Iceland able to
meet with obligations effectually. In addition to this, in terms of bank loan the commercial banks
require to assess business valuation and analyse financial statements also (Holroyd and et.al.,
2014).
7
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2.4 Influence of financing sources on financial statements Income statement: When the Iceland limited raising fund from equity then dividend
amount needs to give to potential stockholders. In context to this, when it takes bank loan
then interest amount imposes by bank on Iceland which is given from profit generated.
Hence, it can be said that level of profit affects in negative manner in profit and loss
account of Iceland due to increasing indirect expenditures.
Balance sheet: Moreover, when it raises fund then level of capital increases in the
liabilities side which is positive impact on balance sheet of the Iceland limited. Apart
from this, cash and cash at bank both enhance which lead to increase total assets at the
end of fiscal year (Carpenter and Petersen, 2012). Hence, it can be said that balance sheet
of Iceland influence in favourable situation.
TASK 3
3.1 Projected cash budget
With the help of cash budget Iceland able to know that how much net cash balance will
be remain in the firm in next month. Estimated budget of cash for entity is as below:
Interpretation
8
amount needs to give to potential stockholders. In context to this, when it takes bank loan
then interest amount imposes by bank on Iceland which is given from profit generated.
Hence, it can be said that level of profit affects in negative manner in profit and loss
account of Iceland due to increasing indirect expenditures.
Balance sheet: Moreover, when it raises fund then level of capital increases in the
liabilities side which is positive impact on balance sheet of the Iceland limited. Apart
from this, cash and cash at bank both enhance which lead to increase total assets at the
end of fiscal year (Carpenter and Petersen, 2012). Hence, it can be said that balance sheet
of Iceland influence in favourable situation.
TASK 3
3.1 Projected cash budget
With the help of cash budget Iceland able to know that how much net cash balance will
be remain in the firm in next month. Estimated budget of cash for entity is as below:
Interpretation
8
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It can be said from the respective projected cash budget that inflows as well as outflows
both are increases consistently but with the higher and lower growth rate from April to
September. Due to this reason net cash balance at the end of every month enhances which is
profitable for Iceland. Net cash position of Iceland limited increase from 1220 GBP to 4517 GBP
which is highly profitable for it (Megginson, Ullah and Wei, 2014). It can be said regards to the
cash budget that management will generate higher profit at the end of month.
3.2 Computing units cots and price
For calculating cost of per unit there are all the cost are supposed to add which are
incurred in production process. Compotation of cost and price of one unit is shown as below:
On the basis of above presented table total cost of the production is worth of 1,20,000
GBP where total production level is 4000 units. As per such cost and output cost of each unit is
derived worth of 30 GBP (1,20,000/4000). In order to derive price of one unit there is cost plus
pricing method is to be used in which desired percentage of profit is added in cost of one item.
Further Iceland will sell its retail products and services at the rate worth of 42 GBP (30+40%).
9
both are increases consistently but with the higher and lower growth rate from April to
September. Due to this reason net cash balance at the end of every month enhances which is
profitable for Iceland. Net cash position of Iceland limited increase from 1220 GBP to 4517 GBP
which is highly profitable for it (Megginson, Ullah and Wei, 2014). It can be said regards to the
cash budget that management will generate higher profit at the end of month.
3.2 Computing units cots and price
For calculating cost of per unit there are all the cost are supposed to add which are
incurred in production process. Compotation of cost and price of one unit is shown as below:
On the basis of above presented table total cost of the production is worth of 1,20,000
GBP where total production level is 4000 units. As per such cost and output cost of each unit is
derived worth of 30 GBP (1,20,000/4000). In order to derive price of one unit there is cost plus
pricing method is to be used in which desired percentage of profit is added in cost of one item.
Further Iceland will sell its retail products and services at the rate worth of 42 GBP (30+40%).
9
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3.3 Assessing investment appraisal techniques
Techniques which helps to the Iceland limited to determine viability of a project is known
as capital budgeting or investment appraisal methods (Holden and Lunduka, 2014). Such tools
are various among them NPV and IRR are stated along with calculation as below:
NPV
Years Cash flow of project (Amount in GBP) PV @12% Present value
Initial
investment -300000
1 45627 0.893 40738
2 98265 0.797 78336
3 167540 0.712 119252
4 207820 0.636 132073
Total 370400
Less: Initial investment
3
0
0
0
0
0
NPV 70400
IRR
Years Cash flow of project (Amount in GBP)
Initial -300000
10
Techniques which helps to the Iceland limited to determine viability of a project is known
as capital budgeting or investment appraisal methods (Holden and Lunduka, 2014). Such tools
are various among them NPV and IRR are stated along with calculation as below:
NPV
Years Cash flow of project (Amount in GBP) PV @12% Present value
Initial
investment -300000
1 45627 0.893 40738
2 98265 0.797 78336
3 167540 0.712 119252
4 207820 0.636 132073
Total 370400
Less: Initial investment
3
0
0
0
0
0
NPV 70400
IRR
Years Cash flow of project (Amount in GBP)
Initial -300000
10
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investment
1 45627
2 98265
3 167540
4 207820
IRR 20%
Interpretation
On the basis of above calculation it can depicted that the project has positive future value
of initial investment which is worth of 70400 GBP. Further, internal rate of return is also
effective i.e. 20% which is profitable for the Iceland. On the basis of such analysis it can be
recommended to Iceland that it should undertake or adopt the project in business.
TASK 4
4.1 Key aspects of different financial statements Income statement (I/S): Key purpose of such financial statement is to assess profitability
position of Iceland in overall retail industry. It includes different elements such as
revenue, expenditures as well as profit or loss whatever occurs.
Balance sheet (B/S): Another financial statement is balance sheet which requires for
Iceland in order to know liquidity position in the retail sector. Important components of
B/S are like as assets, liabilities and total equity capital of shareholder (Cox, 2014).
Cash flow statement: Purpose to prepare such statement is to analyses availability of net
cash at the end of year. In this cash flow of mainly three activities are to be include such
as investing, financing and operating.
11
1 45627
2 98265
3 167540
4 207820
IRR 20%
Interpretation
On the basis of above calculation it can depicted that the project has positive future value
of initial investment which is worth of 70400 GBP. Further, internal rate of return is also
effective i.e. 20% which is profitable for the Iceland. On the basis of such analysis it can be
recommended to Iceland that it should undertake or adopt the project in business.
TASK 4
4.1 Key aspects of different financial statements Income statement (I/S): Key purpose of such financial statement is to assess profitability
position of Iceland in overall retail industry. It includes different elements such as
revenue, expenditures as well as profit or loss whatever occurs.
Balance sheet (B/S): Another financial statement is balance sheet which requires for
Iceland in order to know liquidity position in the retail sector. Important components of
B/S are like as assets, liabilities and total equity capital of shareholder (Cox, 2014).
Cash flow statement: Purpose to prepare such statement is to analyses availability of net
cash at the end of year. In this cash flow of mainly three activities are to be include such
as investing, financing and operating.
11
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Statement of shareholder’s equity: It helps to assess available total capital in terms of
equity which is invested by shareholders. Key aspects to such account are like as equity
capital and retained profit.
4.2 Comparison between financial statements
Basis of comparison Iceland Limited Sole trader
Meaning Those firms which are legally listed
in stock market and follow all the
laws and regulations of authority
body are known as limited entities.
The company which not needs to
follow any kind of regulations and
having whole ownership with in
person is identified as sole trader.
Financial statements For the limited firm it is necessary
to prepare all the financial
statements.
For such entities not require to
prepare all financial statements but
to keep record of financial
transactions it makes income
statement and balance sheet
(Engel, Fischer and Galetovic,
2013).
Tax amount Requires to include amount of
taxation paid by it.
Not require to include such
expense in I/S.
Publications of
financial statements
Necessary to publish legally. Not required.
Accounting standards
and laws
Compulsory to follow all the rules
and standards while making
accounting treatments.
Not necessary to follow such
rules.
4.3 Assessing business performance of Sainsbury’s Plc using financial ratios
Profitability ratios 2015 2016
Gross profit (GP) 1208 1456
12
equity which is invested by shareholders. Key aspects to such account are like as equity
capital and retained profit.
4.2 Comparison between financial statements
Basis of comparison Iceland Limited Sole trader
Meaning Those firms which are legally listed
in stock market and follow all the
laws and regulations of authority
body are known as limited entities.
The company which not needs to
follow any kind of regulations and
having whole ownership with in
person is identified as sole trader.
Financial statements For the limited firm it is necessary
to prepare all the financial
statements.
For such entities not require to
prepare all financial statements but
to keep record of financial
transactions it makes income
statement and balance sheet
(Engel, Fischer and Galetovic,
2013).
Tax amount Requires to include amount of
taxation paid by it.
Not require to include such
expense in I/S.
Publications of
financial statements
Necessary to publish legally. Not required.
Accounting standards
and laws
Compulsory to follow all the rules
and standards while making
accounting treatments.
Not necessary to follow such
rules.
4.3 Assessing business performance of Sainsbury’s Plc using financial ratios
Profitability ratios 2015 2016
Gross profit (GP) 1208 1456
12
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Net profit (NP) -166 `471
Revenue 23775 23506
GP ratio 5% 6%
NP ratio -1% 2%
Liquidity ratio
Current assets (CA) 4421 4444
Current liabilities (CL) 6923 6724
Current ratio 0.64 0.66
Solvency ratio
Debt 2337 2053
Equity 5539 6365
Debt equity ratio 0.42 0.32
Interpretation
From the above financial ratios it can be analysed that all the profitability ratios of Plc
increases from FY 2016 to 2016. Increasing gross profit ratio clearly indicates that the finance
manager is able to control over the expenses which are comes into consideration in production
process. Apart from this, NP ratio enhances from -1% to 2% which shows that indirect expenses
and debt reduces from 2015 to 2016 which is better for the firm. In context to this, liquidity
position of Plc is also enhancing from 2015 to 2016. Current ratio of the firm is increasing from
0.64 to 0.66 which shows that able to recover its debt position and short term obligations in the
year 2016 (Zhao and Chu, 2016). Moreover debt to equity ratio reduces from 0.42:1 to 0.32:1 by
which it can be said that ’s form takes less debt and enhance equity capital. Hence, overall
financial performance of is better in the year 2016 compare to FY 2015.
13
Revenue 23775 23506
GP ratio 5% 6%
NP ratio -1% 2%
Liquidity ratio
Current assets (CA) 4421 4444
Current liabilities (CL) 6923 6724
Current ratio 0.64 0.66
Solvency ratio
Debt 2337 2053
Equity 5539 6365
Debt equity ratio 0.42 0.32
Interpretation
From the above financial ratios it can be analysed that all the profitability ratios of Plc
increases from FY 2016 to 2016. Increasing gross profit ratio clearly indicates that the finance
manager is able to control over the expenses which are comes into consideration in production
process. Apart from this, NP ratio enhances from -1% to 2% which shows that indirect expenses
and debt reduces from 2015 to 2016 which is better for the firm. In context to this, liquidity
position of Plc is also enhancing from 2015 to 2016. Current ratio of the firm is increasing from
0.64 to 0.66 which shows that able to recover its debt position and short term obligations in the
year 2016 (Zhao and Chu, 2016). Moreover debt to equity ratio reduces from 0.42:1 to 0.32:1 by
which it can be said that ’s form takes less debt and enhance equity capital. Hence, overall
financial performance of is better in the year 2016 compare to FY 2015.
13
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CONCLUSION
From the summing up the project it can be assessed that for raising capital in Iceland
limited to expand business equity capital is the most suitable source of finance for it. This source
imposes cost of finance on the firm in form of dividend amount which is given to stockholders. It
can be suggested that it should undertake project which provides positive and better NPV as well
as internal rate of return. On the basis of financial ratios it can be concluded that performing
well from the fiscal year 2015 to 2016.
14
From the summing up the project it can be assessed that for raising capital in Iceland
limited to expand business equity capital is the most suitable source of finance for it. This source
imposes cost of finance on the firm in form of dividend amount which is given to stockholders. It
can be suggested that it should undertake project which provides positive and better NPV as well
as internal rate of return. On the basis of financial ratios it can be concluded that performing
well from the fiscal year 2015 to 2016.
14
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