Essays on Financial Statement for 2011 and 2012 - Billabong International Ltd Case Study

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The paper 'Financial Statement for 2011 and 2012 - Billabong International Ltd " is a good example of a finance and accounting case study. Billabong International Ltd has been able to create a niche market for itself due to the manner in which the organization has been able to attract people and retain them. The company deals in surf, skates and snow apparel and accessories which itself is rare and manufactured by few have helped them to develop a brand image for their products. This has helped them to develop their business which started in Australia to other parts of the world like New Zealand and South Africa.

The growth is further witnessed through a change witnessed in the work culture which has increased the number of employees in the organization to more than 1800. This report will look to analyze the financial statement for 2011 and 2012 by making a comparison based on different ratios like current ratios, profitability ratio, asset efficiency ratio and market performance ratio. This is followed by a recommendation for the short and long term and the limitations.

This will thereby help the user of the financial statement to understand the performance better and based on it can take decisions. Financial Analysis The financial analysis holds an important aspect while making decisions as looking into the different factors and analyzing the manner the organization has performed helps to develop present and future strategies. The financial analysis for Billabong International Ltd based on the different ratios is as Profitability Ratios This ratio helps to determine the manner in which the business has been able to make profits by carrying out the daily activities (Birt, Chalmers, Byrne, Brooks & Oliver, 2012).

This is one of the most important as it helps the business to make future strategies and ensure that all the expenses can be covered by the organization itself. The calculations are Gross Profit Margin: This ratio attributes the profit which the business has made after deducting the direct cost associated with production. The graphical representation for Billabong International Ltd is as The ratio highlights a huge dip in gross profit margin from 53% in 2011 to 47% in 2012 which is an area of concern.

This could be either due to an increase in direct cost like labour or reduce in the sale while having the same cost. This is an area which has to be looked at and ways have to be developed to reduce cost and improve the margins. Net Profit Margin: This ratio highlights the final profit which the business is able to make after meeting all the expenses. The graph for the same is as The analysis shows that the net profit margin has improved which is a good sing and shows better control over indirect expenses.

This is a good sign and shows the proper use of resources (Fridson & Alvarez, 2011). The business needs to continue similarly and has to ensure that shareholders are properly compensated through higher profits. Return on Assets: This ratio determines the manner in which the assets have been used to generate the profits for the business. The graph is as The returns on assets have improved drastically primarily due to the increase in the profits. This also highlights the fact that the business has managed the assets properly and have ensured that they have the required assets which are neither more nor less so that adequate returns can be ensured highlighting good use of assets

References

Antony, T. (2004). Thin Capitalization: Issues on the Gearing Ratio. Journal on Australian Taxation, 7 (1), 39-57

Birt, J., Chalmers, K., Byrne, S., Brooks, A., & Oliver, J. (2012). Accounting: business reporting for decision making (4th Ed). Australia: Wiley

Brigham, E. F., & Houston, J. F. (2004). Fundamentals of Financial Management (10th Ed.). Ohio: South-Western, Thomson Learing

Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance & Accounting, 30(3&4), 573-587.

Eljelly, A. (2004). Liquidity-Profitability Tradeoff: An empirical Investigation in an Emerging Market. International Journal of Commerce & Management, 14(2), 48 - 61

Fridson, M., & Alvarez, F. (2011). Financial Statement Analysis: A Practitioner's Guide (4 Ed.). John Wiley & Sons

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