Begga Chesse: Analysis of Financial Performance and Accounting Report

This report provides a detailed financial analysis of Begga Chesse, utilizing ratio analysis to evaluate the company's performance over a three-year period. The analysis encompasses key financial metrics, including Return on Equity (ROE), Return on Assets (ROA), net profit margin, inventory turnover, settlement periods for receivables and payables, asset turnover, current ratio, and the debt-equity ratio. The report interprets the trends and fluctuations in these ratios, offering insights into the company's profitability, efficiency, liquidity, and capital structure. The findings indicate areas of concern, such as declining profitability and inefficient asset utilization, while also highlighting strengths like a good current ratio. The conclusion emphasizes the importance of ratio analysis for business firms and recommends specific improvements for Begga Chesse to enhance its financial health and competitive position. The report includes references to academic literature and online resources to support the analysis.

ACCOUNTING COMPANY ANALYSIS REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Application of accounting tool to analyse company performance..................................................1
Interpretation of results....................................................................................................................2
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5
Table 1Ratio analysis of Begga Chesse...........................................................................................1

INTRODUCTION
Ratio analysis is one of the most important approach that is used to analyse company
performance. In present research study ratio analysis of Begga Chesse is done and in this regard
three year financials are analysed in proper manner. Multiple areas related to company are
analysed by using ratios. Systematic interpretation of firm performance is done and at end
conclusion section is prepared. It can be said that firm performance is analysed in proper manner
in the present research study.
Application of accounting tool to analyse company performance
Table1: Ratio analysis of Begga Chesse
Profit 2014 2015 2016
Net profit 62567 11666 28906
Shareholder equity 314388 312666 327838
ROE 20% 4% 9%
Net profit 62567 11666 28906
Total assets 548637 552419 586674
ROA 11% 2% 5%
Net profit 62567 11666 28906
Sales
106939
2
111263
0
119596
7
Net profit margin 5.85% 1.05% 2.42%
Efficiency
COGS 951117 991538
104259
5
Average inventory 189528 189528
193643.
5
Inventory turnover
ratio
5.01834
6
5.23161
7
5.38409
5
Account receivable 106660 111508 143673
Total credit sales
106939
2
111263
0
119596
7
Number of days 365 365 365
Settlement period 36.4047
36.5803
7 43.8479
Account payable 164152 139081 156044
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Total credit purchase 951117 991538
104259
5
Number of days 365 365 365
Settlement period
payable
62.9948
6 51.1978
54.6291
3
Net sales
106939
2
111263
0
119596
7
Average total assets 550528 550528
569546.
5
Asset turnover ratio
1.94248
4
2.02102
3
2.09985
8
Liquidity
Current assets 321541 552419 586674
Current liability 212170 179287 209253
Current ratio
1.51548
8
3.08119
9
2.80365
9
Gearing ratio
Debt 20000 57500 47500
Equity 314388 312666 327838
Debt equity ratio
0.06361
6
0.18390
2
0.14488
9
Interpretation of results
 ROE: It is the ratio that is also known by name return on equity. This ratio reflects return
that is generated by company for investors on each unit they paid for purchasing
company shares (Brown and Nyonna, 2015). It can be seen from table given above that
value of return on equity was 20% in year 2014 and it decreased to 4% and then suddenly
same increased to 9%. It can be said that firm failed to generate sufficient return for its
investors and investors does not get sufficient amount of return for risk they take on
making investment in the company. It can be said that firm need to improve its
performance and in this regard it must take number of steps in its business so that benefit
of earning of more profit in the business can be passed to the investors.
 ROA: ROA is also known as return on assets as it is the ratio that reflects the return that a
company can receive on each unit of asset that is in the business (Ni and et.al., 2010). It
can be observed that value of return on asset was 11% in year 2014 which decreased to
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2% and then increased to 5%. It can be said that return are fluctuating consistently in the
business and firm failed to make best use of asset in its business as by using these assets
less return is generated which is not good for the company. Hence, firm must formulate a
strategy under which it must purchase less assets in its business and with present size of
assets it must try to maximise earning in the business.
 Net profit margin: Net profit margin reflects the profit that is generated by the firm on
each unit of sales that is made in the business. It can be seen from table given above that
net profit margin in year 2013 was 5.85% and same decreased to 1.05% in year 2015 and
increased to 2.42% in year 2016. It can be said that firm profitability declined at fast rate
in the business but some recovery observed in the business in year 2016. Hence, it can be
said that firm must prepare cost control strategy in its business to improve its
performance. In this regard entire business operations need to be reviewed again and
unproductive steps can be identified (Noreen, Brewer and Garrison, 2011). By taking
steps these unproductive steps can be removed from operations and profitability can be
increased in the business.
Inventory turnover ratio: Inventory turnover ratio reflect efficiency with which firm is making
effective use of inventory to generate sales in the business. Higher is the inventory
turnover ratio it is assumed that firm is able to convert its inventory in to sales at fast rate
in the business (Ai and Guo, 2011). It can be observed that value inventory turnover ratio
was 5.01 in year 2014 and same increased to 5.23 in year 2015 and same increased to 5.38
in year 2016. Hence, it can be said that firm make best use of inventory in its business as
value of ratio is increasing consistently but still firm need to improve its performance. It
can be said that company must keep less inventory in its business to avoid blockage of
cash in unsold goods.
 Settlement period for receivables: This ratio reflects the time period that is taken by the
firm to cover its receivables from debtors in relevant time period (Ertaş and Karkacıer,
2016). It can be seen from table given above that value of ratio was 36.40 in year 2014
and same increased to 36.58 and further elevate to 43.84 in year 2016. It can be said that
debtors are given liberality and they are taking more time to make payment of debt
amount to the company. It can be said that firm must follow strict cash control strategy in
its business.
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 Settlement period for payables: It can be seen from table that settlement period for
payables is 62.99 for year 2014 and same was 51.19 in year 2015 which increased to
54.62 in year 2016. It can be said that less time is take to make payment to the creditors
(Monaco and Di Matteo, 2011). Overall, it can be said that les time is taken to make
payment to creditors but more time is given to debtors which is not good for the business.
There must be balance between both ratios.
 Asset turnover ratio: Asset turnover ratio reflects efficiency with which firm is making
best use of use of asset in its business (Richardson, Tuna and Wysocki., 2010). It can be
observed that asset turnover ratio value in year 2014 was 1.94 and same in case of 2015
was 2.02 and increased slightly to 2.09 in year 2016. On this basis it can be said that asset
worst use is made in the business as in order to generate sales it is turned 2 times in a year
(Asset turnover ratio, 2017). This ratio is very low and this value need to be improved
and in this regard firm need to take number of steps in its business. It must make prudent
use of asset in its business.
 Current ratio: Current ratio is the one of the important ratio because it reflects liquidity
position of the company (Zeff, 2016). It can be observed that current ratio value in year
2014 was 1.51 and value of same in year 2015 was 3.08 which decreased to 2.80. It can
be said that company have sufficient amount of current assets in its business and it can
paid current liabilities on its business on time. Interesting fact is that firm profitability is
declining or is not sufficient but current ratio value is high. This means that firm is not
making sufficient use of current assets in its business and due to this reason current asset
proportion of current liability is high. It can be said that firm need to infuse more and
more cash in its business so that performance can be increased to maximum possible
level.
 Gearing ratio: Gearing ratio is also known by name debt and equity ratio. It can be
observed that value of debt equity ratio is 0.06 in year 2014 and same increased to 0.18 in
year 2015 as well as value declined to 0.14 in year 2016. It can be said that firm capital
structure is not balanced and proportion of debt is very low in respect to equity. Hence,
firm need to restructure its capital structure and it must finance more and more from debt
in its business relative to equity (Piotroski and So, 2012). Thus, it is the major area
where due attention must be paid by Begga Chesse in its business.
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CONCLUSION
On the basis of above discussion, it is concluded that there is significant importance of
ratio analysis for the business firm. Based on the analysis, it can be said that condition of firm is
not good and it need to improve its condition in terms of profitability and usage of inventory as
well resturcting of capital and control on expenses in the business. By working on all these areas,
firm can extremely perform well in its business and can beat competitors.
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REFERENCES
Books and Journals:
Brown, P.K. and Nyonna, D.Y., 2015. Empirical analysis of firm attributes before and after the
Sarbanes-Oxley Act. International Journal of Financial Research. 6(2). p.139.
Ni, X.Z., and et.al., 2010. Total fractionation and analysis of polysaccharides from leaves of
Panax ginseng CA Meyer. Chemical Research in Chinese Universities. 26(2). pp.230-234.
Noreen, E.W., Brewer, P.C. and Garrison, R.H., 2011. Managerial accounting for managers.
McGraw-Hill Irwin.
Ai, L.I. and Guo, C.H.E.N., 2011. Establishment of the threshold of oil spectrum analysis in the
aircraft engine based on SVM. Journal of Aerospace Power. 26(4). pp.771-778.
Ertaş, F.C. and Karkacıer, A., 2016. Effects of Turkish Accounting Standards application on
independent audit procedures. Accounting & Management Information
Systems/Contabilitate si Informatica de Gestiune. 15(4).
Monaco, A. and Di Matteo, U., 2011. Life cycle analysis and cost of a molten carbonate fuel cell
prototype. International Journal of Hydrogen Energy. 36(13). pp.8103-8111.
Richardson, S., Tuna, I. and Wysocki, P., 2010. Accounting anomalies and fundamental analysis:
A review of recent research advances. Journal of Accounting and Economics. 50(2-3).
pp.410-454.
Zeff, S.A., 2016. Forging accounting principles in five countries: A history and an analysis of
trends. Routledge.
Piotroski, J.D. and So, E.C., 2012. Identifying expectation errors in value/glamour strategies: A
fundamental analysis approach. The Review of Financial Studies. 25(9). pp.2841-2875.
Online:
Asset turnover ratio, 2017. [Online]. Available through:<
https://www.myaccountingcourse.com/financial-ratios/asset-turnover-ratio>.
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