Case Study: Financial Performance Analysis of Wyvern Stationary

This case study examines the financial performance of Wyvern Stationary, focusing on its profit and loss account, balance sheet, and the perspectives of key stakeholders. The analysis highlights increasing sales and gross profit over two years, while also noting rising expenses that impact net profit. It provides a detailed breakdown of changes in fixed and current assets, liabilities, and working capital, offering insights into the company's growth and efficiency. Furthermore, the study explores the interests of the owner, investors, suppliers, and the bank manager in the financial statements, emphasizing their roles in evaluating the company's financial health and making informed decisions. The case study concludes with a summary of the financial situation and the implications for the various stakeholders. This case study is a great resource for students to understand financial statement analysis.

CASE STUDY

TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................................1
1. The interested people of the Wyvern stationary ....................................................................................1
2. Outcomes from the profit and loss account of Wyvern stationary.........................................................1
3. Listing the main changes that have occurred in balance sheet for two years.........................................2
4. Particular points from statements that owner's bank manager will note ...............................................3
CONCLUSION ..............................................................................................................................................3
REFERENCES...............................................................................................................................................5

INTRODUCTION
The financial statements of the stationary present the financial condition in front of the investors,
suppliers and owner to evaluate and regulate the performance of the Wyvern stationary. Wyvern
stationary sales the stationary products like the pen, rubber, notebook, drawing tools etc. The
case stud highlights the interested person of the financial statement of the wyvern stationary and
the outcomes from the profit and loss account. It also evaluate the changes in the last 2 year
balance sheet.
1. The interested people of the Wyvern stationary
The interested people in the financial statement like trading and profit and loss account and the
balance sheet of the Wyvern stationary are the owner, investor and suppliers of the stationary.
The owner of the study need the financial statement to evaluate the performance of the
stationary and get the real profit of the stationary (Robinson, and et.al., 2015). It will also help
them to prepare the budget of the organization, maintain the expenses and distribute the profit
among the staff and investors.
Investors need the financial statement of the Wyvern stationary to evaluate the
performance of the stationary and get their share in the profit of the stationary. Through the
balance sheet and profit and loss account they also regulate the expenses of the stationary and
force the owner to control the expenses so they can get the higher profit (Christensen, and et.al.,
2016).
The suppliers are interested in the profit and loss account and the balance sheet of the
Wyvern stationary understand the performance of the stationary and the growth in the market so
they can also raise their prices of supplying the material to the stationary and earn the higher
profit from them.
2. Outcomes from the profit and loss account of Wyvern stationary
The owner find from the profit and loss account of the last 2 year is that the sales of the
stationary is increasing from £27500 to £48200 in the 2 years. It also observe from the profit and
loss account that the expenses of the stationary was increasing from the last year. The
administrative expenses and the wages are increasing which affect their profit. The gross profit of
the stationary in last year is £9200 and in current year the gross profit is £13014. the net profit of
the stationary also increase but the rate of increasing net profit is lower than the gross profit
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increasing rate because the expenses of the stationary was increasing from the last year (Cao,
Chychyla, and Stewart, 2015).
Net profit percentage : Net profit percentage gives the comparison of net profit and the sales of
the stationary. The calculation for the net profit percentage are as follows :
Net profit / sales * 100
For the 1 year
3790 / 27500 * 100
= 13.78
For the 2 year
6410 / 48200 * 100
= 13.29
The net profit percentage shows that the percentage is decrease from the last year which means
that the stationary is not perform well in compare to the last year. They have to manage the
expenses of the stationary do they can get the higher profit and also increases the sales.
3. Listing the main changes that have occurred in balance sheet for two years
Fixed assets :
 Shop lifting – has been increased by 500 pounds in the current year.
 Equipment - has increased by 750 pounds in the current year.
Current assets:
 Stock – it has been increased by 3990 pounds in the current year.
 Debtors – increased by 1055 in present year.
 Bank balance – it became nil in the current year
Current liabilities :
 Bank : bank liability is created in the current year of £ 2955.
 Creditors : Creditors increased by £ 2120.
Working capital :
It has been reduced in current year by £ 1805.
Long term liabilities :
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 Loan from bank : £ 200 bank loan amount has been decreased in the current year.
Increment in the fixed assets shows that business is expanding and growing. Long term
liability has also been reduced in current year and the business requires less working capital
which means that company is managing its operations efficiently (Kostyukova and et.al., 2017).
Also, the increased assets has resulted into increased short term liability in the form of bank
overdraft. Profits were higher than the previous year and also sales which shows that company is
growing in terms of its profitability.
4. Particular points from statements that owner's bank manager will note
Bank's manager would be interested in knowing the financial health of the Peter's
business. Bank reviews all the financial statements of the business including profit and loss
account, cash flow statement, balance sheet for assessing the ability of the business entity/ owner
of a business to repay the amount of loan taken by the bank. Furthermore, bank manager also
considers the scenario when the business goes into bankruptcy (Karadag, 2015).
From the income statement of Peter's business, the bank manager would consider the
sales and expenditures for finding out the sources of business's net profit. This helps the bank
manger in knowing what are the fixed costs such as wages, rent etc., of the business that
consumes most of the part of net profit.
From the balance sheet, manager would point out the all the assets that have increased in
the current year and short term liabilities which has also increased in the current year. It takes
assets into consideration because if the net profits of the business fails to pay interest and
principal, then it would recover its amount from the fixed and current assets of the business by
selling them in the market (Wilson, 2016).
So, these are the points which are considered by bank's manger because the business has
taken £ 3000 overdraft facility and £2000 loan for the recovery and security purpose.
CONCLUSION
From the above project report, it can be summarised that there are different stakeholders
of financial statements of a business such as investors, owner, customers. Investor are interested
in financial statement of a business because it wants to know the financial health of the
concerned business for the investment purpose. Further, it was concluded that a bank's manager
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is interested in business's financial statement for knowing the ability of business owner to repay
the loan and overdraft amount.
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REFERENCES
Books and Journals
Cao, M., Chychyla, R. and Stewart, T., 2015. Big Data analytics in financial statement
audits. Accounting Horizons,29(2). pp.423-429.
Christensen, B.E., and et.al., 2016. Understanding audit quality: Insights from audit professionals
and investors. Contemporary Accounting Research, 33(4). pp.1648-1684.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
strategic management approach. EMAJ: Emerging Markets Journal. 5(1). pp.26-40.
Kostyukova, E. I and et.al., 2017. Evaluation of the company's financial condition from the
position of different groups of stakeholders. Espacios. 38(33).
Robinson, T.R., and et.al., 2015. International financial statement analysis. John Wiley & Sons.
Wilson, F., 2016. Making loan decisions in banks: straight from the gut?. Journal of business
ethics. 137(1). pp.53-63.
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