Accounting Report for WaveRider: Financial Performance and Analysis

This report provides a comprehensive financial analysis of WaveRider, a small service business. It examines the income statement, analyzing revenue from hire services and lesson income, along with various expenses, leading to a net profit figure. The balance sheet is also assessed, detailing assets, including bank accounts and petty cash, and liabilities, such as loans and creditors, to determine the financial position and liquidity of the firm. Ratio analysis is conducted, focusing on profitability ratios like return on equity and net profit ratio, as well as liquidity ratios such as current and quick ratios. The report identifies limitations in the analysis due to the business's structure and offers recommendations regarding potential new business ventures, including stand-up paddleboarding and the purchase of a van to expand services. The report concludes with an assessment of WaveRider's current financial state and its implications for future business decisions.

Accounting
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Contents
Introduction......................................................................................................................................3
Section B: Report to owner, Daniel Simons....................................................................................3
Part 1................................................................................................................................................3
Part 2................................................................................................................................................5
Results and findings.........................................................................................................................6
Conclusion.......................................................................................................................................6
Referencing......................................................................................................................................7
Appendix..........................................................................................................................................8
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Introduction
As a small business owner it is at the most important to check that how the organisations
financial report. Whether it is giving profit or whether it is in loss. Accounting is the basic
element for every organisation to see if the business is providing the owner sufficient returns or
not. It includes the comparison of the data of the company and the analysis of the of peer’s
business that are already working on it. Various performance benchmarks should be checked for
the same so that they are able to understand the working of industry and the area where changes
are to be made. This report consists of the analysis of the financial data of Daniel Simons,
Summary of the financial reports for the current financial year, ratio analysis of the financial
statements and report of profitability. Also identification of the limitations of ratio would be
done. At last the analysis of the different business opportunity that is available to Mr. Daniel
would be done for the following year.
Section B: Report to owner, Daniel Simons.
Part 1
Business report
A business report is an evaluation of the financial data of an enterprise and the feedback
that is generated from the analysis that is done so that owner can take further steps to achieve the
target of maximum profits. It is the assessment of the financial issues or the circumstances or
operations that relates to the performance of the business (Broda, 2013). For this the income
statement of Waive rider has been considered and the Balance sheet has been analysed so that a
close look at the performance of the company can be traced. It is seen that financial statement of
Wave rider is in good position as it is interpreted below:
INCOME STATEMENT: It presents the information on the financial results of the company
business activities over a period of time. This statement represents how much revenue the
company has obtained during that period and what is the total expenditure that the company has
incurred for gaining that revenue.
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Income: wave rider has achieved the income from hire service which is the main
operating income of the organisation (Shaheen, et. al., 2014). The organisation has achieved the
sales figure of 127,242, which is the income for the period of one year and it is at the good level.
Also the part of revenue that is made from lesson income is 30,180. So the total revenue income
form the service is around 158,052. This reveals that the business is in the good position as
compared from the previous year and the service provided by them is being accepted by
customers at a good level. The total income of the company also includes some other income that
has been achieved by the owner’s skills and competencies (Collis, & Hussey, 2013). This includes
the discount received on the materials purchased, freight collected from the service of providing
vans for delivery and profit from sale of PPE. The total other income figure obtained is 886
which is one-time income received for the current financial year.
The expenses that are done by the owner of the shop are relatively high if compared from
the industry benchmark. As the industry benchmark have the average expense of 53%. It is
relatively high for the owner and to be maintained at around 40%. The expense of wages and
salaries is the main expense for the organisation that has to be controlled and taken care of, while
the interest expense is on the second position that has to be checked for so that the total expense
can come to around 40% of the total turnover of the shop.
The net profit of the company is around 47,775 which is not as per the industry
benchmark and is to be corrected for the purpose. So as to maximise the net profit of
organisation.
BALANCE SHEET: It represents the assets and the liabilities of the organisation. It is the
statement that helps the owners to analyse whether the burden on the organisation is more or not.
It also depicts the liquidity of the firm (Sadgrove, 2016). As in the case of wave rider their
balance sheet represents the assets and the liabilities with current as well as noncurrent assets and
liabilities.
The current assets of the firm include the Bank account which is showing a good figure,
petty cash is also maintained to achieve the target of regular small expense. The total assets of
the firm is 390,913.
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Total liabilities of the company include loan from the bank as well as current liabilities
which includes the creditors of around 5,372. The total liabilities of the firm is 230,960. Which
when deducted from the assets gives a total asset of 159,953.
RATIO ANALYSIS
Profitability ratio: These ratio represents the financial performance of the firm which
shows how profitable a firm is. It includes the following:
Return on equity: This ratio measures the profitability of equity fund. For wave rider the
return on equity is very less as the return is around 29% which should be around 40% for this
industry.
Net profit ratio: this ratio measures the overall profitability of the company on the basis
of sales figure (Hair et. al., 2015). The net profit ratio of the firm is 30% which is again industry
benchmark of 45%.
Liquidity ratio: It is the ratio tells the ability to pay off the debts and obligations of the business.
It includes the following ratios that are discussed below:
Current ratio: this ratio measures the financial strength of the firm. For the firm wave
rider the current ratio is 1.27:1. Which should further be increased to bring the industry
benchmark of 2:1
Quick ratio: this ratio shows the liquidity of the firm (Cotton, & Falvey,2012). As the firm
does not have any prepaid expenses that should be deducted from the current assets so the quick
ratio is also same for the above.
Limitations
While analysing these ratios it is founded that as the elements in the business are very
less so it is restricted to conduct the ratio analysis (World Bank Group, 2014). There are various
other types of profitability analysis that can be done but for the firm it is not possible to conduct
the same.
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Part 2
As in water sports stand up paddle boarding is the latest craze. Daniel has been
approached by the members of the public and the schools has also added the SUP in their
outdoor activities. A school has approached him so that he can achieve the target of
implementing outdoor activities. This sport is limited to seasonal sport and would only be
dependent on summer. The enrolment would be limited to only 20students and Daniel
would charge them $25 per students.
On the other hand he is considering to buy a van that will cost to him around $1200
and additional cost of around $1000. Through which he would be able to make the clients
travel around the queens land coast that will increase his sales turnover.
It is recommended to Daniel to Daniel that as he has the sufficient fund to purchase the
van that of 12 seater he can purchase it for around $2,200. As this would enable him to
achieve the target of increasing sales figures. Also he would be able to generate revenue for
the same from the above plan if incorporated.
As the opportunity of the coordinating the school is given to Daniel that involves the
total cost of $6000 for 10 students. That he cannot assume if taking into consideration the
current business position. Also he has to hire other instructor for teaching the students that
will again cost him more. It would make him pay the double to accommodate the new
instructor (Newman, and et. al., 2017). The charges that Daniel has to pay the instructor
should not be more than the amount that he earns.
Other cost that Daniel would have to pay to its employees includes the cost of food
allowance, pension schemes, bonus, incentives and the other benefits like amenities
seasonal bonus and advance salaries that his employee ask to him when required by him.
Results and findings
It is seen that the wave rider is not in the best condition to start the new venture as he does
not have the sufficient funds for its operations. The financial figures are not good and the profits
are not as expected.
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Conclusion
From the above report it is seen that financial account of the company’s represents the true
position of the firms. This is depicted from the above report that ratios gives the comparability
standards for the firm so that the financial performance can be analysed in a better way.
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Referencing
Books and journals
Broda, T. (2013). U.S. Patent No. 8,577,989. Washington, DC: U.S. Patent and Trademark
Office.
Collis, J., & Hussey, R. (2013). Business research: A practical guide for undergraduate and
postgraduate students. Macmillan International Higher Education.
Cotton, D., & Falvey, D. (2012). Market Leader Upper Intermediate: Business English Course
Book. Pearson education.
Hair Jr, J. F., Wolfinbarger, M., Money, A. H., Samouel, P., & Page, M. J. (2015). Essentials of
business research methods. Routledge.
Newman, N., Fletcher, R., Kalogeropoulos, A., Levy, D. A., & Nielsen, R. K. (2017). Reuters
Institute digital news report 2017.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.
Shaheen, S. A., Martin, E. W., Cohen, A. P., Chan, N. D., & Pogodzinski, M. (2014). Public
Bikesharing in North America During a Period of Rapid Expansion: Understanding
Business Models, Industry Trends & User Impacts, MTI Report 12-29.
World Bank Group. (2014). Doing Business 2015: Going Beyond Efficiency: Comparing
Business Regulations for Domestic Firms in 189 Economies: a World Bank Group
Flagship Report. World Bank Publications.
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Appendix
RETURN ON EQUITY
Formula: Net profit/Net worth 47775/159953 = 0.29
NET PROFIT RATIO
Formula: Net profit/Sales*100 47775/158052 = 30%
CURRENT RATIO
Formula: current assets/ current liability 15061.37/11,768.41 = 1.27
QUICK RATIO
Formula: Quick assets/ current liability 15061.37/11768.41 = 1.27
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