IntroductionOrganizations based on their performance look to set targets for the future and also determine the manner in which the finance for the future will be raised. This report looks to present the manner in which Lavender Products Pty Ltd has performed over the previous years and based on it the future potential and developments will be identified. This will thereby help to understand the manner in which Lavender Products Pty Ltd will be able to get future loan for their business and will help to understand the different areas where the company has to work.
Financial AnalysisThis looks to present the financial comparison of Lavender Products Pty Ltd over the past few years and will help to understand the manner the company has performed. The fact that individual financial figures have no value as it doesn’t help to interpret any information so comparing it with the past performance and the peers will help to understand the actual growth and will help to formulate strategy for the future (Antony, 2004). Profitability RatiosThis ratio helps to find out the manner in which the bottom line of Lavender Products Pty Ltd grew over the years and will help to find out the manner in which they were able to manage the different resources to generate the concerned profits.
The ratios are asReturn on Assets: The ratio highlights that Lavender Products Pty Ltd has been able to use their assets better with passing years which has helped the return on assets to improve drastically to 50.5% in 2012 from 28.9% in 2010. This has been primarily due to the fact that the bottom lines have grown and the assets haven’t grown in the same manner as the profits highlighting better use of the resources and the ability of the business to generate sufficient revenues. Return on Shareholder’s Equity: The ratio highlights that Lavender Products Pty Ltd has been able to improve their returns i. e.
profits which has helped to ensure that the shareholders are adequately compensated for the risk they have taken as it has grown to 55.1% in 2012 from 27.1% in 2010. This has been primarily due to the fact that the bottom lines have grown and will make the investors feel happy as they are getting a good return for the risk taken which will thereby help to increase the future investors in the company and will help the share prices to move up.
Earnings per Share: The ratio highlights that Lavender Products Pty Ltd earnings per share have grown considerably which has been possible due to increase in profits and being able to work on the industry standards which has helped the ratio to improve drastically to $3.89 in 2012 from $1.69 in 2010.
This highlights that the investors are getting better return and the share prices of the company is moving up. This will act as a push and help Lavender Products Pty Ltd to be able to improve its conditions further and ensure better returnsThus, the overall profitability ratios show that Lavender Products Pty Ltd has improved their performance year after year and has a good prospect of getting the required loan if profitability is alone considered but a look at the other ratios will help to understand it further.