Essays on Financial Analysis of Boomaloo Pty Ltd Article

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The paper "Financial Analysis of Boomaloo Pty Ltd" is a good example of a finance and accounting article. Background: Ian Scott is looking forward to purchasing Boomaloo Pty Ltd from Marcus Markup which is into the fishing business. Ian wants to look at the future prospects and the manner his investment will fetch him returns before making a financial decision. Ian is looking towards the financial analysis before deciding his future course of action. Financial analysis is very important for all business. Analyzing the statement helps in “ planning, budgeting, monitoring, forecasting and improving the financial performance by taking the vital decision” .

(Micro Strategy, 2010It helps to identify trends and compare with competitors and industry to gain an advantage. Purpose of the report: To identify and evaluate the financial statement of Boomaloo Pty Ltd with a view to providing recommendation to Ian Scott whether purchasing the company will be beneficial in the long run considering the nature and risk involved. Scope: The report looks into various aspects but doesn’ t take into consideration the inflation level, the changes in technology with regard to production, marketing and distribution. Profitability The profitability ratios help to find the manner in which the company has performed in relation to its bottom line i. e.

profits. Some of the ratios in that direction are Return on Assets: “ It is defined as the amount of profit generated for per dollar of asset” . (Friedlob & Schleifer, 2003) It helps to identify whether the assets are utilized properly or underutilized. It shows consistency over the years highlighting that despite increasing completion the assets have been well managed. Even the trend and horizontal analysis support the fact that both assets and profits have shown consistency. Gross & Net Profit Margin: Gross profit helps to find out the actual profit that is attributed directly to the product.

Net profit is the profit after all expenses are met. Both the ratios show soundness and match the industry standard of 30% and 10% highlighting proper management. The efficiency of this ratio multiplies when we look at the trend analysis which shows that despite increasing competition the sales and profits have not dipped much.

References

Financial Modelling Guide, 2010, “Liquidity ratios”, retrieved on October 17, 2010 from http://www.financialmodelingguide.com/financial-ratios/liquidity-ratios/

Friedlob G & Schleifer G, 2003, “Essential of Financial Analysis”, 2nd Edition, John Wiley & Sons Ltd

Kennon J, 2010, “Analyzing an income statement: Receivable Turnover”, about.com guide, The New York Times Company

Micro Strategy, 2010, “Financial Analysis”, retrieved on October 17, 2010 from http://www.microstrategy.com/financial-analysis/

Mehar A, 2005, “Impact of financing on liquidity position of firms”, Journal of Applied Financial Economics, Volume 15, Issue 6, page 425-438

Summers J & Smith B, 2010, “Communication skills handbook”, 3rd edition, John Wiley & Sons Ltd, Brisbane

Transtutor, 2010, “Capital Structure Ratios”, retrieved on October 17, 2010 from http://www.transtutors.com/finance-homework-help/dividend-decisions-and-tools-of-financial-planning/Capital-Structure-Ratios.as

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