The paper 'Get n Go Pty Limited Business Strategies" is a great example of a finance and accounting case study. Background: Financial statement analysis refers to a way of identifying the financial strengths and weaknesses by establishing a proper relationship between the items in the profit and loss statement and the balance sheet (Besley and Brigham, 2007, p. 9). Once the relationship is established one goes ahead to write a report about a business. In this paper, Michael Graham interested investor wants to use information from financial statement analysis to make a decision of buying a business or not.
This is because; he has experience in operating such business, and enough money to purchase the company. Therefore, it is necessary to have an analysis and interpretation of the statements to ensure the making of quality decisions. Purpose: In many business organizations, reports aim at meeting the obligations of the external environment. In addition, reports are prepared to ensure that the uses of the report can make suitable decisions. In this case, information from the report is for Michael’ s indecision on whether to invest in Get n Go Pty limited or not. Scope: Despite the fact that the report in most cases helps in decision-making, the information provided in the financial statement alone is not conclusive.
As a result, decision-making is possible once an individual is a trough with analysis and interpretation of various financial statements. Discussion Profitability Ratio analysis Profitability ratio measures the business operations results to determine the overall performance and effectiveness of a business. The profitability ratios of Get n Go Pty limited has no definite trend for the past three years. For instance, retained earnings moved from 100% to 56% to 83% over the three years.
However, many factors affect these ratios. These include expenses and prices thus determining the trend. Return on assets: There exists an indefinite trend in the total assets of 100% to 90% to 2009 to 93% from 2009 to 2011. This means that both assets, and liabilities together with the capital invested in the business is increasing. The profit and loss statement has no definite trend because operating profit moves from 100% to 88% to 96% from 2009 to 2011. Price-Earnings ratio and Dividend ratios: Price-earnings ratio measures of the amount paid per share as compared with the amount of profit per share earned by a business.
While dividend earnings ratio shows the amount of dividend paid annually as compared with the prices charged. This ratio shows the substitutability of the different measures of earning. The high price-earnings ratio and the dividend ratios show the ability of the business to pay a dividend. Sub conclusion of profitability On looking at the profitability ratios of this company, it is worth noting that there is no definite trend, at times, the profits are high, and at times, they are low.
Therefore, this is not a good investment as it may lead to loss of funds. In this case, Michael should consider alternative options for investing his money. Liquidity Liquidity ratios measures how solvent business is in the short term. Calculation of this ratio aims at determining the ability of a business to meet current or short-term obligations (Brigham and Houston, 2009, p. 10). Current and quick ratios: This refers to the ability of a company to meet both the long-term and short-term obligations.
In the case of Get n Go Pty limited, there exists an upward trend; this means that the business is sound and able to meet these obligations. Therefore, this is a good action by the company as it shows that through its assets, it can be able to settle debts and get some profits left.
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