IntroductionBackground: Jitterbug Pty Ltd is a company which provides live music, jive club, concerts, prints, posters, books and other branded clothes. The company has been performing well but the owner Shane Long is looking towards an up-gradation of the company so that the financial performance improves further. To ensure that the up-gradation process goes through Shane Long is looking towards a loan from the bank based on the past performance of Jitterbug Pty Ltd. This has made Shane Long consider into the financial analysis of Jitterbug Pty Ltd as it will help to improve the planning, budgeting, monitoring of the performance of the company (Micro Strategy, 2010).
This will help to identify the areas that they need to work upon. Purpose of the report: To identify the performance of Jitterbug Pty Ltd over the past few years so that on the basis of it the bank can decide whether it would be correct to provide Jitterbug Pty Ltd a loan of $600,000. This will thereby help to ascertain the risk involved and take decision based on it. Scope: The report looks into different aspect of financial planning but doesn’t consider the changes in inflation, technology, government policies, economic effects and comparison with competitors while evaluating the performance.
ProfitabilityThe profitability ratios will help the bank to evaluate the performance of the past years and help them in taking decision regarding the loan of $600, 000. Some of the ratios in that direction areReturn on Assets: It is the profit generated on the use of assets (Friedlob & Schleifer, 2003). This helps to evaluate the effectiveness in the use of assets. The results show consistency and improvement of performance over the years.
This is substantiated by the trend and horizontal analysis which shows growth in profits and assets highlighting efficiency in performance. Return on Shareholder Equity: Return on shareholder equity is said to be the final profits which attributes to the shareholders of the company. The ratio highlights improvement in return for shareholder highlighting the growth in profits which has ensured that the equity holders are receiving a higher return over years. The trend and horizontal analysis supports this as it shows improvement in performance over the years.
Price Earnings ratio: It is calculated as the market price of share based on the earnings per share (Summers & Smith, 2010). The company has a high P/E ratio suggesting that the paying out ratio for the company is sound which shows that the company is efficient in paying its obligations. Dividend Ratio: The dividend ratio shows a slight dip but the dip is not substantial suggesting that the company is looking towards using the resources for development of the company. This is supported by the trend analysis which shows that the company has saved money to plough it back in the business to ensure better returns in the future. The overall analysis for Jitterbug Pty Ltd is sound and it shows an opportunity to invest in.
Moulding the process and upgrading the club will help to increase the flow of customers and will improve the performance of Jitterbug Pty Ltd. This makes the company a good company which can avail the loan from the bank.