Investment Report of a Business
Added on 2020-04-15
10 Pages3194 Words32 Views
Finance
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Running head: INVESTMENT REPORTInvestment ReportUniversity NameStudent NameAuthors’ Note
2INVESTMENT REPORTAn analysis of company’s’ liquidity ratios along with sales and net income Financial statement analysis can be considered as a process of selection, evaluation andinterpretation of financial data, together with other relevant information, in a bid to design anevaluation of a company’s present as well as future financial condition and overall financialperformance. Day’s sales in receivables: As rightly indicated by Ehiedu (2014), day’s sales in particularlyaccounts receivables also referred to as the total number of days of firm’s receivables, reflectsaverage number of days it requires to pull together firm’s accounts receivable. Enumerationfor ascertainment of day’s sales in accounts receivables involves division of total days in ayear (that is 365 days) by the accounts receivable turnover ratio for a particular year. In thiscase a lower ratio indicates a favourable condition as it implies firms can collect cash earliermore frequently from their customers and can utilize the cash for various other operations.The day’s sales in receivables is registered to be 104 in 2011, 126 in 2012, 91 in 2013, 77 in2014, 74 in 2015 and 95 in 2016. The day’s sales in receivables have decreased considerablyduring the year 2016 as compared to the base period 2011, although it has increased incomparison to year ago period. Also, the average is registered to be 94.66 that are lower thanthe industrial average. Therefore, it reflects a favourable financial condition for the firm. Accounts Receivable Turnover: Accounts receivable turnover can be regarded as theefficiency ratio that enumerates the number of times a specific business can transformaccounts receivable of a firm into cash particularly during a specific period. In a way, thisratio can be considered as a liquidity ratio that can reflect the extent of efficiency of acompany at acquiring its credit sales from their clientele (Mohanram et al., 2017). In thiscase, higher ratio implies that corporations are amassing their receivables more frequently allthrough the year. As enumerated in the case of NCC-Gulf Cement Company P.S.C, theaccounts receivable turnover was observed to be 3.50 in 2011, 3.183 in 2012, 3.41 in 2013,
3INVESTMENT REPORT4.62 in 2014, 4.459 in 2015, 4.146 in 2016. The receivable turnover ratio has increased in theyear 2016 as compared to the base period 2011 although it reflects a downward deflection in2016 as compared to the year ago period. On the whole, the average can be calculated to 3.89that is over and above the industry average of 3.09. Thus, it can be hereby inferred thataccountable receivable turnover ratio reveals a favourable liquidity condition of the firmNCC-Gulf Cement Company P.S.C. Accounts Receivable Turnover in Days: Accounts receivable turnover can be considered asthe total number of times every year that a specific business amasses average accountsreceivable. This ratio replicates the degree of efficiency of the firm in collecting all the creditsales granted from their customers. Essentially, shorter days implies that the firm can collecttheir receivables in lesser time (Cortesi et al., 2015).Accounts Receivable Turnover in Daysfor the firm NCC-Gulf Cement Company P.S.C is recorded to be 104 in 2011, 115 in 2012,107 in 2013, 79 in 2014, 82 in 2015 and 88 in 2016. The recorded figures show that theAccounts Receivable Turnover in Days of NCC-Gulf Cement Company P.S.C has decreasedduring 2016 as compared to the base period 2011. Also, the average for the period recordedto be 95.78 is lower than the industrial average of 298. 08. Therefore, this reveals a soundliquidity condition for the firm in terms of Accounts Receivable Turnover in Days. Day’s Sales in Inventory: Day’s sales in calculation of inventory enumerate the totalnumber of days a company will take to market all it inventory. Lower days of inventoryoutstanding can be considered to be more desirable than comparatively higher ratio (Titmanet al., 2017). The recorded figures for day’s sales in inventory is registered to be 125 in 2011,143 in 2012, 160 in 2013, 152 in 2014, 147 in 2015 and 143 in 2016. The figures recordedshows that day’s sale in inventory has declined during the year 2016 as compared to the yearago period, although it has increased in comparison to the base period 2011. However, theaverage is recorded to be 145.07 that is much above the industry average. Thus, it can be
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