The paper "Budgeting of Crown Ltd " is a good example of a finance and accounting case study. The company investors both current and potential investors are interested in information to contain in the annual report (Chordia, 2008). The company current investors use the annual report to obtain and evaluate the company financial performance in order to assess the effectiveness of realizing they're predetermined business objectives and earn dividends. Potential investors use the information in the annual report to assess the company’ s profitability, economic and financial stability to evaluate whether they should invest in the company. Management The company’ s management uses the annual report to determine the performances of the company and provided corrective measures to realized shareholder objectives.
Management assesses the corrective measures on the business to enhance efficiency in its operations. Financiers Financiers are interested in the company’ s information in the annual report to assess the company’ s creditworthiness as depicted in the credit rating to enable them to determine whether they should finance the company or limit their credit to the company. Government agencies Government agencies are interested in financial information in order to control the company’ s taxation policies on the basis for national income statistics as well as regulating the company’ s activities. Information contained in the annual report The annual report contains detail description of company information both financial and non-financial (Clyde Stickney, 2006).
The information in the company annual report is sequentially described according to the specific directives such as the director’ s report, financial statements, and governance report. The financial statement contained in the annual report provides the company’ s financial performances over the financial period. This information assists the users to assess the company’ s financial condition and performance thus making a valid investment decision. Director report in the annual report provides specific investment and managerial information on the company’ s profile.
This information reveals the company’ s critical investment decisions. Task 2.2 Profitability ratios Profitability ratios are ratios used to determine the company’ s aptitude in making profits in relative of the equity, turnover and assets. Profitability ratios measure the business entity’ s ability in generating earnings and the cash flows in relative to the company’ s investment. Return on assets Return on assets ratio is used in assessing the company’ s profits relative to the average total assets employed in making profits (Clyde Stickney, 2006).
The higher return on assets ratios indicate that the company operates efficiently in generating earnings while lower ratios disclose poor efficiency or the competitor's efficiency in strategic ways that earnings as compared to the company’ s profitability on the assets Return on assets = C Crown Limitedumn1 2012 2011 2010 EBIT 619,818 407,114 387,309 Total Assets 5,872,530 5,023,775 4,969,121 Return on Assets 10.55% 8.10% 7.79% From the return on assets graph, Crown Ltd reveals an increasing trend of return on the company’ s assets from 7.79% in 2010 to 8.10% and 10.55% in 2011 and 2012 financial years. This describes that the company is efficient enough in utilizing its assets to generate earnings hence it is considered viable for investment.
Alisdair McGregor, C. R. F. C., 2013. Comparability analysis on financial statements . In: s.l.:Routledge, p. 113.
Chordia, T. R. R. &. S. A., 2008. Liquidity and market efficiency. Journal of Financial Economics, pp. 249-268.
Clyde Stickney, R. W., 2006. Financial Accounting: An Introduction to Concepts, Methods and Uses. In: s.l.:Cengage Learning, p. 317.