Essays on Australia Funghi Importers Ptd Ltd Analysis Case Study

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Executive summary This report indent to give evaluation and analysis of the current subject matter and prospective liquidity, profitability, and financial stability of Australia Funghi Importers Ptd Ltd. Analysis methods include vertical and horizontal as well as ratios such as quick and current ratio. Other calculation that I will use includes earning per share, total asset, and rate of return on shareholders equity. All the working can be found in the appendix. From the analysis of the data given for Australia Funghi Importers, there is a clear indication that the company is operating below the industry average.

Comparative performance particularly is poor in areas of credit control, liquidity, profit margin, and inventory management. According to this report, the prospect of the company is not positive in its current position and conclusion. There is a need therefore for the management to look into major areas of weakness and carry out father investigation. The recommendation discussed in this report includes improvement of the collection period for the account receivable, improvement of inventory turnover, increasing inventory level, and reducing prepayment. Analysis has limitation and this report further carry out an investigation on that accounts.

Among the limitation that is identified in this report includes, foretasted figures not provided, the current economic condition and the nature of the company is not known. The information from the data given is not enough i. e. monthly details of the business and the results are based on past performance, not the present. Table of content Introduction. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..3 Body. .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Conclusions. .... .... .... .... .... .... .... .... .... .... .... .... .... .. Recommendations. .... .... .... .... .... .... .... .... .... .... .... .... . Limitation. .... .... .... .... .... .... .... .... .... .... .... .... .... .... References. .... .... .... .... .... .... .... .... .... .... .... .... .... ... Appendixes. .... .... .... .... .... .... .... .... .... .... .... .... .... . Introduction This report gives a con-size interpretation of the data through ratio analysis regarding liquidity, profitability, and financial stability of Australia Funghi Importers Ptd Ltd for the years 2010-2012. The report gives attention particularly to credit management and liquidity, earning power, the outline of debt management, inventory management, a highlight of major weakness and the strength of the company, and explanation for observed changes.

The report will also make recommendations that will improve the Australia Funghi Importers Ptd Ltd and comment on the prospect of the company's current performance. The limitation of the observation will be noted and given adequate concern. The explanation of how prospectus and cash flow statements could enhance analysis will also be provided in the report (Gitman & McDaniel, 2008). Profitability Australia Funghi Importers Ptd Ltd in the three year period of the analysis is very Satisfactory as its average is 7.24 which is much higher than 3.85, grand industry average, which is taken as standard.

This is a sign of strong sales. Coefficient of variation of the inventory-turnover ratio of Australia Funghi Importers Ptd Ltd is 27.10%, which shows less consistency in the three year period because the coefficient of variation of the industry as a whole is 12.47%. Greater variability in the Inventory-turnover ratio indicates improper or inefficient management of inventory (Gitman & McDaniel, 2008). The trend of operating profit after tax is positive and that reflect satisfactory in both performance and growth.

In the data provided, the analysis shows that the return on total assets of the year 2011 is 37.36%, but in 2012 is 26.06%, the ratio has decreased by 11.3%. This indicates that the company has become less profitable. The shareholder return on equity ratio has also decreased from 32.82% of 2011 to 24.17% of 2012. The ratio measure earnings are generated from the asset provided by the owners.

It indicates that the company is using the shareholder's equity inefficiently. Business is making low profit return on the money borrowed during the year 2011 and 2012 (Gitman & McDaniel, 2008). The horizontal analysis that begins with monetary amount change shows a decrease in 2011 and 2012 by 2.21%, which leads directly to gross profit dropping by 4.35%. The ratio also indicates that although there is an increase in profit after tax from 2010 to 2011, there was a decrease in 2012. The 148% dividend payout ratio in 2007 is an indication of business paying more than one time of its profit as dividends, and it has no big power for growing.

As per the ratio analysis, Australia Funghi Importers Ptd Ltd is making a decrease in profit during 2010, 2011, and 2012, this is not satisfactory to the company (Gitman & McDaniel, 2008).

References

Gitman, L. J. and McDaniel, C., 2008, the Future of Business: The Essentials, Cengage

Learning, New York.

Moyer, R. C., McGuigan, J. R. and Kretlow, W. J., 2008, Contemporary Financial Management,

Cengage Learning, New York.

Siegel, G. and Shim, K., 2006, Accounting Handbook, Barron's Educational Series, New York

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