Comprehensive Financial Analysis of Reject Shop Limited (2016-2017)

This report presents a financial analysis of Reject Shop Limited, focusing on its performance between 2016 and 2017. The analysis evaluates key financial aspects including profitability, operating efficiency, liquidity, solvency, and market performance. The study utilizes financial ratios and director's reports to assess the company's financial position. It also investigates the impact of external factors such as regulatory changes, market competition, and consumer preferences, comparing Reject Shop's performance with industry averages and competitors like Big W and Kmart. The report examines the company's gross profit margin, return on assets, asset turnover, current ratio, debt-equity ratio, and earnings per share, providing insights into the company's financial health and strategic challenges. The analysis incorporates information from financial press articles, offering a comprehensive view of Reject Shop's financial landscape.

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Financial Analysis

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................1
REFERENCES................................................................................................................................2

Reject Shop Limited
Financial analysis of the Reject Shop limited
Profitability
Profitability of the company could be analysed by gross profit ratio and the net profit
ratio. Company has maintained the gross profit margin of 42% over both the years which means
that the cost of sales and revenues have increased in the same proportion. There has been no
additional cost in the cost of sales. Increase in revenues shows that company has achieved
growth (Goncharov, Mahlich and Yurtoglu, 2018). Rate of return of company has declined from
the last year as even after decrease in total assets of the company as the earnings of the company
before interest and taxes have declined significantly dropping down the return.
Operating efficiency
Operating efficiency could be assessed by the asset turnover that has increased from last
year. this reflects that the management of the reject shop is effectively managing the assets for
producing returns by generating sales. Also the operating expenses of the company are under
control by the management. This reflects the management of the company is effectively
managing its costs and keeping it under control. This shows the effectiveness of the corporate
strategies implemented by the company in its operations.
Liquidity
Liquidity of the company could be assessed using the current ratio that reflects the ability
of company to meet the short term obligations with the available current assets (Perobelli, Famá
and Sacramento, 2016). Current ratio of the company in 2016 was 1.49 that increased to 1.60 in
2017. This reflects the business is having liquidity for meeting its short term obligations from the
available assets.
Solvency
Solvency of the company is analysed using the debt equity ratio. Debt equity ratio of
company was 0.08 in 2016 that increased to 0.11 in 2017. There has been a upward movement in
the ratio that is due to the increase in loans of the company. it could be analysed that the financial
risks of the business is low as the company is not having high debts. For having capital structure
with low cost it could adopt for debt financing from which it could avail tax benefits.
Market performance
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Market performance is analysed by the EPS of the company. from the financial
statements of the company it could be analysed that earnings per share of the company have gone
down as the earning of the company has gone down from last year.
The external factors have influenced the business of the enterprise. the increased level of
substitutes and the big giants has affected the revenues of the company. the increased
competition has led the change in consumer preferences leading to decline in the profit levels of
the company.
The competitor K mart is performing well in the market and is not affected by the
consumer behaviours. Corporate strategies of the company are helping to face the market issues
efficiently by the business. However, it could be seen that the Reject shop has also maintained he
market share by maintain the revenue levels of the business.
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REFERENCES
Books and Journals
Goncharov, I., Mahlich, J. and Yurtoglu, B.B., 2018. Accounting Profitability and the Political
Process: The Case of R&D Accounting in the Pharmaceutical Industry. Available at SSRN
2531467.
Perobelli, F.F.C., Famá, R. and Sacramento, L.C., 2016. Return and liquidity relationships on
market and accounting levels in Brazil. Revista Contabilidade & Finanças.27(71). pp.259-
272.
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