The paper 'Accounting for Business of Jitterbug Company " is a good example of a finance and accounting case study. Jitterbug Company is involved in hosting special events like master classes, concerts and other happenings that involve Jazz undertakings. It was purchased by Shane long in 2008 and involves the trading in the Jazz & Jive club. Currently, the company retails in posters, branded clothing, prints and books in addition to its primary operation. The upgrading of its operations has been perceived to have hyped the company’ s profitability and enhance the overall company’ s performance over the last few years.
The report entails the company’ s financial statements; the balance sheet, profit and loss statements and the statements of cash flows. The focus is on its performance in the economy and as such the liquidity, profitability and the financial stability for the company will be determined. The bank will decide on whether to grant a Jitterbug loan to expand its operations or not based on the financial analysis to be provided. Profitability The operating profit for the company increased over the past three years. For instance, the reported operating profit after taxation was $104000, $220000 and $214000 for 2008, 2009 and 2010 respectively.
This increase ensured that the profitability ratios in which the company experienced also increased tremendously. In the case of the return on assets (ROA), there was an increase of 0.5% in 2010 as compared to that of 2009. This indicated an increase of 25.9% in regard to 2008 Return on Assets’ reported value. Following this trend, the return on assets ratio will increase making the company to effectively realize the required profits from the assets in which it has (Bill, 2001). Returns on Shareholders Equity also experienced an upward shift in its ratio.
The company reported an increased value of 44.3% in 2010 in comparison to 41.9% for the year 2009. The increase was facilitated by the increased company’ s operations and the subsequent increase in the share price of the shareholder’ s shares. In the case where the company is competitive in the economy its share prices skyrockets making it realize its economic benefit. The importance of increased return on shareholders equity is that the investors will be willing to invest in the shares of Jitterbug Company hence increasing its capital outlay for expansion and increasing operations.
The trend is expected to continue at this rate and the company speculates a tremendous increase on the return on shareholders equity and the plan for expansion of its operations will be enhanced (Erich, 2001). The company’ s price-earnings ratio was reported at 32.9%. This implies that the company’ s current profit outlay is higher than the speculated amount in the industry. The price earning ratio for many companies was determined at 21% in the year 2010.
Following the current trend of increased profit outlay, the future price earning ratio will be high therefore profitability health of the company will be unquestionable. The Dividend Yield ratio for the company in 2010 was 39.08%. It provides a clear indicator to the investor on the imperative measures to be undertaken when making a decision concerning future investment and the available investment opportunities in the economy. The Dividend Payout Ratio for the company was reported at 118.7% in 2010 and 120.0% in 2009; which was a drop by 1.3%.
The company resulted in increasing its retained earnings rather than using the net income for dividend payments. The investor will use the information provided to make a decision on whether to invest in a company that uses its net income in payment of dividends rather than as retained earnings. Generally, Jitterbug profitability level in the economy is prominent and if the trend continues, in the near future, it will realize its strategic goals with ease.
BILL, R. 2001. Financial analysis. London: Prentice Hall.
DAVID, V. 2002. Financial analysis and decision making: tools and techniques to solve financial problems and make effective business decisions. New York: McGraw-Hill Professional.
ERICH, H. 2001. Financial analysis: tools and techniques : a guide for managers. New York: McGraw-Hill Professional.
GILL, J. 2005. Financial analysis: the next step. London: Pearson Education.
THOMAS, F. 2003. Essentials of financial analysis. London: John Wiley and Sons.