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RUNNING HEAD: Financial reporting

   

Added on  2021-04-21

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RUNNING HEAD: FINANCIAL REPORTING Financial analysis

Financial reporting 1ContentsIntroduction...........................................................................................................................................2Description and Swot analysis...............................................................................................................2Vertical and Horizontal Analysis...........................................................................................................4Ratio Analysis.......................................................................................................................................6Cash flow Analysis................................................................................................................................8Segment analysis...................................................................................................................................8Recommendation and conclusion..........................................................................................................9References...........................................................................................................................................10Appendix 1..........................................................................................................................................12

Financial reporting 2Introduction Financial analysis means evaluating and analysing the financial performance of a company. For an investor, it is very important to know about the profitability of the company, in which he is going to invest his funds (Bragg, 2012). The report contains an analysis of performance and position of the two companies named as Katrina Group Ltd and ABR Holdings Ltd. It includes SWOT analysis, vertical, horizontal and ratio analysis. The cash flow statement and segment analysis of the both the companies is also done in the report. The findings of the analysis are stated in the last part of the report followed by recommendation and conclusion. Description and Swot analysis Katrina Group Ltd is a Singapore based investment holding company that owns and operates a chain of restaurants and cafes under nine food and beverages brand including Bali Thai, Muchos, Indobox and many more. The company is listed on Singapore Stock Exchange as SGX: 1A0 (Katrinagroup.com., 2018).ABR Holdings Limited is a food and beverages company, having its headquarters in Singapore. The company, along with its subsidiaries manufactures ice-creams in Malaysia, Singapore and all over the Asia. Listed in Singapore exchange, it is traded as SGX: 533 (Abr.com.sg., 2018).Basis Katrina Group ABR HoldingsStrength It has developed its own nine brands and among them, the strongest are Bali Thai, So Pho and Streats. Provides online services related to ordering and delivery. Company has high profitability position. It also makes high revenue. The labour cost of ABR holdings is low and it has skilled workforce.WeaknessThe company mainly operates The only weakness is that it

Financial reporting 3in Singapore and has only two stores in China. Most of the revenue is generated from Singapore business only.It conducts its business in a very competitive market, wheremany mid-range restaurant owners operates with their ownunique concept (Dbs.com. 2016).has small business units operating all over Asia (Swotanalysis24.com. 2018).OpportunityAs it has its own brands, it can easily get a franchisee and became an operator of other F&B brands also. Establishing new stores in Singapore and acquiring small F&B chains (Dbs.com. 2016).ABR can increase its growth and profitability by approaching to new target markets.The company can offer its manufacturing services in global markets also. ThreatProviding store space on lease can be crucial for company’s operations. It might lose its regular customers. The license can be revoked, if Katrina Group does not met theset standards of food safety andhygiene (Dbs.com. 2016).The increasing rates of interest can be a threat to ABR Holdings.Changes in technology and problems related to it can hinder the manufacturing process of ice-creams (Swotanalysis24.com. 2018).

Financial reporting 4Vertical and Horizontal Analysis Vertical analysis: It is one of the tool used for financial statement analysis in which relationship between various items of the statement is measured. On balance sheet, each item is represented as a percentage of total assets and liabilities, whereas on income statement, each item is shown as percentage of sales. The financial statements prepared are known as common-size statement (Weygandt, Kimmel and Kieso, 2009).Referring to Appendix 1.1, the analysis shows that, the COGS of Katrina Group has increased not only in terms of dollars but also in terms of percentage. In 2015, it was 84.04% of the sales and in 2016, it was 85.20% of sales. The same goes with ABR Holdings but comparatively, the cost of sales of the company is less than the former company. ABR’s gross profit reported at 44.37% in 2016 is also more than Katrina group’s GP of 14.80% in the same year, though reduced as compare to 2015. The expenses of both the companies has risen in 2016. The net profit of Katrina Group was 8.21% of sales in 2015 and in next year, it reduced to 4.17%. In contrast to it, ABR Holdings has a net profit of 7.55% in 2015 and 5.40% in 2016, which was much more than Katrina Group Ltd. The vertical analysis of the balance sheet shows that Katrina’s portion of current assets is 52.45% of the total assets in 2015, which raised to 55.15% in 2016. Whereas, the current liabilities comprises of 28.71%, that increased to 36.28% in 2016. This shows that Katrina Group has strong position of its working capital and can meet its financial obligation easily. Moreover, the percentage of total equity is also higher than the liabilities. Similarly, ABR Holdings also has higher portion of assets and equity than the liabilities but when compare to Katrina, it has more assets and equity and very less portion of liabilities. In 2016, ABR’s equity comprises 85.45% of total liabilities and equity, current assets were 77.98% of total assets and current liabilities were only 13.39% of total liabilities. This implies that, ABR is better at maintaining its capital structure and meeting its short term and long term obligations.

Financial reporting 5Horizontal analysis: It measures year to year change in each and every item of financial statement. The change is determined in both the terms, dollar and percentage by taking one year as a base. In other words, the analysis shows increase or decrease in the items of statement (Godwin and Alderman, 2012).Referring to Appendix 1.2, in income statement, the revenue of Katrina Group has been increased by $4928 and 9.5% in 2016 along with the increase in gross profit of $128 and 1.5%. In contrary to this, revenue of ABR has increased by $3514 and 3.5% with a rise of 0.1% in gross profit. But in terms of amount, revenue and GP of ABR is much more than Katrina Group. All the expenses has increased except the interest expense of Katrina Group which has reduced by $6. The net profit of both the companies has reduced in 2016 but comparatively, the decrease in the profit of ABR is less than that of in the profit of Katrina Group Ltd. ABR’s profit falls by 21.8% and the former company’s profit decreases by 44.3%. So overall, it can be said that, though the change in the revenue earned by ABR is lessbut the company is making profits which are more than Katrina Group. The analysis on the balance sheet shows that, former company’s total assets are increased by $1085 which is less than the increase in the total assets of latter company that is $1815. The total liabilities of Katrina group has increased by 29.64%, whereas in case of ABR, same has risen by 6.25%. Moreover, an increase of 0.82% is been noticed in the total equity of ABR Holdings as compare to Katrina Group. This reflects that, the financial position of ABR Holdings is better than Katrina Group Ltd, because of high percentage of assets and equity and less debt. Ratio AnalysisThis method is used to measure profitability, efficiency, liquidity of a company. It includes calculation of several ratios to know about the different aspects of an organisation. They are

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