BSBFIM601 Manage Finances: Comprehensive Financial Analysis Report

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This report provides a financial analysis of Joe's motorbike tyre company, evaluating its financial performance and tax liability. The analysis includes an examination of the company's financial statements, including the profit and loss statement, balance sheet, and cash flow statement. Key findings include a gross profit of $20,800 and a net profit of $5,200, with the difference attributed to high operating expenses. The company's liquidity position is strong, with a current ratio of 2.73 and a quick ratio of 2.4. Profitability ratios indicate a gross profit margin of 40% and a net profit margin of 10%. The report recommends reducing operating expenses to improve the net profit margin. Overall, the company demonstrates good liquidity, profitability, and efficiency, making it well-positioned for future growth. Desklib offers more resources for students, including past papers and solved assignments.
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Assessment: BSBFIM601 Manage Finances
Project Report: Manages finance
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Assessment: BSBFIM601 Manage Finances
Contents
Introduction.......................................................................................................................3
Financial analysis..............................................................................................................3
Recommendation..............................................................................................................5
Conclusion........................................................................................................................5
References.........................................................................................................................6
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Assessment: BSBFIM601 Manage Finances
Introduction:
In the report, Joe’s motorbike tyres company has been evaluated in terms of
measuring the financial performance of the company and the taxation liability of the
company. The case expresses that the company has made numerous changes into the
performance to enhance the level of the company. In the report, financial statement of the
company has been evaluated and financial analysis study has been performed. Financial
analysis is a process which includes various techniques. On the basis of those techniques, the
overall performance of the company has been measured.
Financial analysis:
Financial analysis process evaluates the various projects, budgets, businesses and
other financial related transaction of the business to measure the suitability and the
performance of the business (Brigham & Houston, 2012). It is used to evaluate the liquidity,
profitability, solvency and suitability position of the company. In the report, financial
statement of the company has been evaluates to make a conclusion about the financial
performance of the company.
On the basis of the profit and loss statement of the company, it has been measured
that the gross profit of the company is $ 20,800 and the net profit of the company is $ 5200.
These differences among the gross profit and net profit have occurred due to the huge
operating expenses of the business. In addition, the balance sheet of the business has been
studied and it has been found that the overall performance of the business has been improved.
The total resources available to the company for the future investment and the liquidity
position are $ 54820. However, the total liability of the company is just $ 9620. It explains
that the company has raised the funds from the owner’s fund rather than the borrowings from
the market (Arnold, 2008).
It has also been found on the basis of the cash flow statement of the company that the
total cash flow at the end of the year is positive which explains that the cash outflow of the
company is lower than the cash inflow of the company. It has also been studied that the Joe is
ordering the material on credit basis due to which lower working capital is required for the
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Assessment: BSBFIM601 Manage Finances
business to run the activities. However, the evaluation on the balance sheet express that the
current assets and the current liabilities of the business is $ 26,220 and $ 9620 respectively.
The liquidity position of the company has been measured and it has been found that
the current ratio of the company is 2.73 and quick ratio is 2.4. It explains that the company
could easily repay the short term debt liabilities (Higgins, 2012).
Liquidity Ratios 2017
Current Ratio
Current Assets / 26,220
Current liabilities 9,620
Answer: 2.73
Acid test ratio
Current Assets -
Inventory / 23,100
Current Liabilities 9,620
Answer: 2.40
In addition, the profitability position of the business has been calculated and it has
been found that the gross profit level and net profit level of the business is 40% and 10%. It
briefs that the operating expenses of the business are higher which has impacted on the
profitability level of the business (Shapiro, 2008).
Profitability Ratios: 2017
Gross Profit Margin
Gross profit / 20,800
Sales Revenue (note used operating
revenue) 52,000
Answer: 40.0%
Net profit margin
Net profit / 5,200
Sales Revenue % 52,000
Answer: 10.00%
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Assessment: BSBFIM601 Manage Finances
Lastly, it has been studied that the assets efficiency position of the company has been
improved and it explains that the company could run the business in lower working capital as
well.
Asset Efficiency Ratios 2017
Inventory Turnover (days)
Average Inventory / 3,120
Cost of Sales # days 31,200
Answer: (note the above needs to be x
365) 36.50
Receivables Turnover (days)
Average trade debtors /
18,00
0
Sales revenue (note used operating
revenue) # days
52,00
0
Answer: (note the above needs to be x
365) 126.35
(Brigham et al, 2016)
Recommendation:
On the basis of the financial analysis on Joe’s motorcycle bike, it has been fund that
the liquidity position, profitability position and efficiency position of the company is quite
better. Company is just required to reduce the level of operating expenses as it would enhance
the net profit margin of the company.
Conclusion:
To conclude, it is essential for each business to measure the overall performance so
that a better decision could be made about the overall performance and the position of the
company.
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Assessment: BSBFIM601 Manage Finances
References:
Arnold, G. (2008). Corporate financial management. Pearson Education.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage
Learning.
Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Shapiro, A. C. (2008). Multinational financial management. John Wiley & Sons.
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