Accounting Financial Analysis Report

Running head: REPORT 1
ACCOUNTING FINANCIAL ANALYSIS REPORT
Student details:
12/25/2018

REPORT 2
Introduction
The accounting regulating organisations of various nations cast a duty of the management of the
company to make and state the financial statements of the company, which show the true and fair
sight of affairs of the corporation. The fair and transparent representation assists the stakeholders
and experts to arrive at meaningful business and other decisions. This report has been made to
evaluate financial performance of John Lewis of Hungerford PLC. The assessment of financial
performance is critical for the stockholder as it assists them to select the great protection from the
marketplace. The economic performance of the corporation can be influenced by numerous inner
factors and outer factors. It is required by the investors to look above inner elements and outer
elements before creating the long-term venture in corporation. In lieu of the internal
examination, entity can assess final statements of corporation and the annual report of
corporation. For external factors, entity can assess report of industries or relate company’s act in
any other entity that is also making performance under the similar industry.
The report will make use of the various ratios to evaluate the financial performance of company
over the time of five years such as the financial years starting from year 2014 to 2018. This
report is further targeted at evaluating the trends in the stock market of the share prices of the
said corporation. This would be followed by the conclusion as to whether it is vital to invest in
the entity based on the wealth of the entity.
Company overview
The company was incorporated in year 1977. The company is based in Wantage, the United
Kingdom. John Lewis of Hungerford PLC creates, produces, trades, and fits bedroom, kitchen,
freestanding furniture, and architectural elements in the UK. The company runs the direct mail
order business in the name of Just Doors to replace the kitchen cabinet door. It trades and sells
the goods by the showrooms in addition to online.
Analysis of Financial Statements: Theoretical Framework
As prescribed in US GAAP framework made by the controllers, financial statements are made
with the purpose to serve the numerous shareholders. It is required further be reported that the
statements should be in the comparative layout to assess the financial performance of the
company in the detailed way. Additionally, it is important to analyse that, as there are various
shareholders, there is no particular objective for the research and representation of the financial
statement of the entity. It means that financial statement serves as the foundation for the various
decisions like lending, purchasing, and controlling and various more (Mazow, 2016). While the
investors are keen to know the complete financial wealth of the corporation, the controllers have
the main purpose of making sure that the financial statements comply with the needs of the
corporate governance and applicable accounting structure. In this way, in order to take the

REPORT 3
decisions, the shareholders should assess the financial statements in respect of the essential
requirements. Further, the financial statements render the competitive study of the financial
performance in respect of the performance of the competitors belonging to the similar company
(Alexander, 2016).
There have been prescribed a number of tools for evaluating the financial vivacity of the
company. These tools are useful for the relevant and specific data from financial statements and
marketplace in respect of the company. These significant tools are the ratio analysis. The
comparative ratio analysis helps the person to achieve an insight regarding the profitability,
efficiency, liquidity, and solvency positions of the company. These ratios are very useful when
compared with the company average and the relative data of the competitor. Additionally, the
ratios help in further trend analysis and therefore complete financial vitality of the company may
be evaluated (Kohli, 2018).
The other way of assessing the latest performance and the worth of the company is by making
use of the price of stock, as resulting from the live market or the stock exchange where the shares
of the public company are traded. This is important to note that the evaluation of the price of
stock in the light of the historical performance of an enterprise would yield limited results. The
said evaluation must be done in conjunction with future prospects of the entity and the latest
information regarding the present agreements entered into by the corporation. An industry
evaluation should also be shared. The evaluation on the above lines would provide the close at
the inclusive level of the company’s position. For that reason, the shareholders may do
investment and the authoritarian decisions (Shaxson and Christensen, 2016).
Analysis of Financial Statements: Practical Application
Calculation of ratios:
The ratios analysis is to assess financial entity’s performance in respect of the various bases like
profitability, working capital management, capital structure and stock market performance. The
ratio analysis provides the brief concept to the investors in respect of the financial performance
and place of the corporation (Van Horne and Wachowicz, 2008). Additionally, with the help of
the ratio analysis past year data could also be compared from the data of latest year as well as the
ratio analysis data can be compared to the company data to assess financial presentation and the
effectiveness of corporation. The study of ratio analysis has made over the corporations. The
calculation of ratios are provided in the appendix (Shapiro, 2008). The net profit and margin and
return on equity depict in respect of the profitability position of the corporation. The average
receivable collection period, return on equity, total asset turnover, times interest earned ratio,
return on total assets etc. show regarding competence position of the entity (Morningstar, 2017).
Furthermore, the debt ratio and earnings yield show regarding the solvency situation of
corporation.