Financial Performance Analysis Report for Caroline, Nyo Nyo Aye

This report provides a financial analysis of Caroline, Nyo Nyo Aye, a newly established trading company dealing in study mate notebooks. The analysis focuses on the company's financial performance during its first month of operation, examining its profit and loss statement and balance sheet. The report highlights the company's initial losses, attributing them to higher expenses and fixed costs associated with starting a new business. It delves into specific financial aspects, such as high rental costs, depreciation, and inventory levels, to provide insights into the company's financial health. Furthermore, the analysis covers the company's cash position, capital base, and financial ratios, such as the current and equity ratios, to assess its financial stability. The report concludes with an overall assessment of the company's financial standing, suggesting that, despite initial challenges, the company has a strong financial foundation and the potential for future profitability.

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FINANCIAL STATEMENT ANALYSIS

Contents
Brief Description:.........................................................................................................................................3
Profit and Loss.............................................................................................................................................4
ANALYSIS OF PROFIT & LOSS ACCOUNT:.....................................................................................................4
Balance Sheet..............................................................................................................................................5
ANALYSIS OF BALANCE SHEET:....................................................................................................................6
CONCLUSION:..............................................................................................................................................6
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Brief Description:
The below company named Caroline, Nyo Nyo Nyo deals in study mate notebooks. It is a trading
company registered in Australia. It deals in mainly 8 products namely as follows:
a) Study mate Premium A4 Exercise Book 96 page
b) Study mate Premium A4 Exercise Book 128 page
c) Study mate Premium A4 Exercise Book 192 page
d) Study mate Premium A4 Exercise Book 240 page
e) Study mate Premium A4 Hardcover Exercise Book 96 page
f) Study mate Premium A4 Hardcover Exercise Book 128 page
g) Study mate Premium A4 Hardcover Exercise Book 192 page
h) Study mate Premium A4 Hardcover Exercise Book 240 page
The Price of all the above mates depends upon its number of pages it contains and its quality.
The company was newly established with capital introduction of $ 500000. The industry in which
company is working is having very good profit margins. But unfortunately the company under discussion
is not able to earn good profits. Let’s have look on the financial results more.
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Profit and Loss
18536600 Caroline, Nyo
Nyo Aye
For the month ended 31
May 2019
Account May 2019
Trading Income
Interest Income 3,750.00
Sales 29,841.10
Total Trading Income 33,591.10
Cost of Sales
Cost of Goods Sold 27,618.66
Total Cost of Sales 27,618.66
Gross Profit 5,972.44
Operating Expenses
Advertising 1,000.00
Depreciation 4052.36
Doubtful debt 190.00
Freight & Courier 200.00
Fuel Expense 900.00
General Expenses 474.00
Insurance 200.00
Interest Expense 1,750.00
Office Expenses 300.00
Rent 10,000.00
Wages and Salaries 8,000.00
Total Operating Expenses 27,066.36
Net Profit (21,093.92
)
ANALYSIS OF PROFIT & LOSS ACCOUNT:
As we can see from above that the company is running in losses. Company is not able to earn profit in
the first month of incorporation. There can be many reason for the above. Let’s discuss some of the
them below:
a) Higher expenses: As it is the first month after incorporation, so expenses would be higher.
b) Fixed cost : In the initial months fixed costs remain higher because of cost of incorporation.
Slowly and slowly this cost reduces with economies of scale. Economies of scale defines as when
the sales increases, as fixed cost remains same, so it gives higher profit. In other words, even if
we don’t make any sales, fixed costs remains there.
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c) Lower selling price: There might be situation that to capture the market, company kept its
selling price lower which might gives lower profit initially.
d) Lower Gross Profit: The above company’s gross profit percentage not that much low that it lead
to Net Loss. It means that the company’s indirect expenses are very high that soaked good Gross
Profit of the company.
Analysis: If we see more deeper into the expenses, the company’s rental cost, depreciation is very high.
In the near future company should plan to buy its owned space for office.
Balance Sheet
18536600 Caroline, Nyo Nyo Aye
As at 31 May 2019
Account 31 May
2019
Assets
Bank
Cash at bank 125,933.56
Total Bank 125,933.56
Current Assets
Accounts Receivable 1,900.25
Interest receivable 3,750.00
Inventory 262,354.07
Office supplies 250.00
Prepaid Rent 99,090.91
Prepayments 3,981.82
Total Current Assets 371,327.05
Fixed Assets
Delivery Van 23,181.82
Les Acc dep Delivery van (3,636.36)
Less Accumulated Depreciation on Office
Equipment (416.00)
Office Equipment 50,000.00
Total Fixed Assets 69,129.46
Non-current Assets
Investment 250,000.00
Total Non-current Assets 250,000.00
Total Assets 816,390.07
Liabilities
Current Liabilities
Accounts Payable 71,830.00
GST (44,616.01)
Interest Payable 1,750.00
Wages Payable - Payroll 8,000.00
Total Current Liabilities 36,963.99
Non-current Liabilities
fuel expense payable 330.00
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Loan 300,000.00
Prov for doubtful debt 190.00
Total Non-current Liabilities 300,520.00
Total
Liabilities 337,483.99
Net Assets 478,906.08
Equity
Current Year Earnings (21,093.92)
Owner A Share Capital 500,000.00
Total Equity 478,906.08
ANALYSIS OF BALANCE SHEET:
The company is having very good cash balance and also very good capital base. It means that company
would not have to bear the bank loan interest which is a good sign of financially strong company. In
other words, it is a cash rich company.
Company’s financial ratios are also good like company is having very good current ratio of 10.05:1. It
means that company’s current assets are 10 times of current liabilities. Company’s equity ratio is also
good as it is having capital of $500000 in comparison to loan of only $300000. It can very easily raise
loan in near future.
Company is having debit means that company has paid more GST on purchase and not able to collect it
through sales. This is also the reason that the high inventory is standing in books. High inventory in
books means funds of company is block in inventory. Company should sale the inventory and realizes
the funds. From banking point of view it is not good.
Company has also transferred $2,50,000 to investment account which is also as the funds were lying
free in the company. Company should repay the loan instead of transferring the fund to investments
because cost of loan is higher than what we are earning from investments.
CONCLUSION:
As this is the first month after incorporation, it will take some time to settle down and make market.
Once it get build up, then definitely it will earn good profits because company’s financials are good and
strong. It is a cash rich company. Company is having very good capital base. Company is having good
recovery period from debtors which is also good sign of doing business. Company is good to invest.
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