Financial Coursework Assignment Sample

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Financial Coursework

 INTRODUCTION

In every business organisation, it is essential to make proper analysis of financial position of the company before making any investment decision. It is consider as one of the crucial aspects for accountant to evaluate each and every financial statements by using certain tools and techniques (Vogel, 2014). Under this project, financial statement of Harrison Plc is being analysed for the period of 2012 to 2016 by using ratios. By this, effective decisions can be made whether to making investment under the company is profitable for the investors.

PART 1

Q1a: Analysis by using ratios

For getting better outcomes for the investors in terms of profitability and effective decision in coming time, it is necessary to analyse financial position of Harrison plc. The best possible ways to determine the current status is by using various ratios. As, by the help of useful ratios profitability, efficiency and liquidity position of the company can easily be identified (Sheikhi, Ranjbar and Oraee, 2012). Some of them are discussed underneath:

Profitability ratio: It refers as systematic class of financial metrics those are utilise to assist a business capability to incur revenues compare to all expenses and relevant costs that are generated by the company during the time. Types of profitability ratios are:

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Ratios

Formula

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2012

2013

2014

2015

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2016

Gross profit ratios

Gross profit /Net sales*100

8.07213

7.950483

7.90757381

8.28232

7.39277

Net profit ratios

Net profit /Net sales *100

2.61518

2.547372

2.50320924

2.86488

1.87553

Operating ratios

Operating income / Total revenue *100

3.89445

3.905971

3.77406932

4.20154

2.9815

Return on equity

Net income/ Total shareholder equity*100

10.726

9.906152

10.3907638

8.69675

6.20997

Return on assets

Net income/Total assets*100

4.88795

4.645098

4.64617584

4.52602

3.01657

Return on capital employed

Operating profit/ Equity share capital *100

0.38696

0.401101

0.49439462

0.24366

0.22819

Liquidity ratios: It refers to be the ability of a company to pay off its financial debts and obligations those is come due in an accounting period of time (Working capital ratio, 2017). It can be determine by using plenty of ratios. Those are discussing underneath:

Ratios

Formula

2012

2013

2014

2015

2016

Current ratio

Current assets/ current liabilities

0.528061224

0.6672332

0.58105939

3.45767

0.780328798

Liquid ratio

Liquid assets/current liabilities

0.269132653

0.3484024

0.26420546

0.57528

0.497732426

Net working capital ratio

Working capital Total assets

4.65909E-05

5.437E-05

4.6149E-05

0.00023

5.27784E-05

Efficiency ratio: It is known as all those non interest expenditure less loss on foreclosed assets. This particular ratio is used to determine total capability of company to meet out future aims with its available resources. There are so many ratios by which Harrison Plc can evaluate their financial efficiency to make further investment decision. Some of them are mention below:

Ratios

Formula

2012

2013

2014

2015

2016

Total assets turnover ratios

Sales/ Total assets

1.8

1.8

1.8

1.57

1.608

Inventory turnover ratio

Sales/ inventory

26.0

23.8

23.67

23.8

23.85

Receivable turnover ratio

Sales/ Average receivable

61.7

78.2

76.37

23.8

50.48

Debt to equity

Debt/ equity

-0.5872217

-0.62130692

-0.68313

-0.476551637

-0.56739

Earnings per share

Net income - Preferred dividend /No. of share price

1.8104575

1.587743733

1.481013

2.219354839

1.676692

Q1.b: Comparative analysis of Harrison’s share price 2012 to 2016

2012

2013

2014

2015

2016

% Change

1b

FTSE 100 Index

5488

5896

6622

6310

6945

% Change FTSE

-

7.43%

12.31%

-4.71%

10.06%

Tasco PLC Share Price

272

-

-

-

204

-25%

Alders PLC Share Price

403

-

-

-

233

-42.18%

Luddles PLC Share Price

337

-

-

-

493

46.29%

Harrisons PLC Share Price

306

359

395

310

266

-13.07%

% Change Harrisons

-

17.32%

10.03%

-21.52%

-14.19%

According to the above share prices, it has been seen that performance of Harrison plc in 2012 is started at positive stages and till then it is increasing at faster rate. In comparison to other three company's it has been seen that their share prices is much more effective in the same year. Whereas, Harrison share prices is increase in every year till 2015. But in 2016, it has been seen downfall in prices. Only Luddles plc is in commendable position as relation to other. (Baker and English, 2011). In 2016, percentage changes according to FTSE, everyone of them is in negative position. Moreover, for investors Harrison is best company to take investment decision because of their balance in share price. The overall results are indicating that share prices of Luddles plc in terms of percentage is much higher in comparison to other.

Q1.c: Assess the strength of premium investment

From the above calculation of ratios, it has been seen that profitability position of Harrison is more effective as they are having sufficient amount of profit and return to its shareholders. As per the profitability ratios, it has been seen that Harrison’s is at commendable position as comparison to its gross profit which is constant in every year with 7 to 8 %. It is continuously increasing every year which means that Harrison is having sufficient chances of growth in near future. It is the biggest strength of the company they are positive enough to face any competition with their resources. Likewise, the liquidity position is also healthy enough to meet out its short term obligations that are presented with the company during the period. Current ratios is under the ideal expectation which is 2:1. However, liquidity ratios are also in more enough to convert liquid cash into one year of time in more easy manner. With the help of efficiency ratio, it has been observe that Harrison is efficient to attain long term objectives with available profit and market share. In order to make valuable decision regarding investment of capital in the business of Harrison plc, it is good sign as they are at more suitable position in terms of market price (Doucette and et. al., 2012). After making analysis of share prices of Harrison's, it has been seen that -13% of downfall is been seen in 2012. The other three company's are having more downfall as compare to Harrison's like -25% for Tesco, -42.18% for Alders Ltd and 46.29% is only positive company which is in little bit healthy position. It can be analyse that all three companies those are major competitors of Harrison is also having balance share prices which can affect stability but at the end they are good enough to face any challenges coming in front of them.

CONCLUSION

From the above project report, it has been concluded that financial analyse can help the company’s to make valuable decision regarding certain investments. For this purpose, various tools and techniques can be use by accountant to evaluate position of the company. Ratios analysis is the best tools which is use under this project report to make certain suggestion about the performance of Harrison plc. By this, it will be easy to determine necessary solution to increase goodwill as compare to other competitors.

REFERENCES

Books and journals:

Vogel, H. L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.

Sheikhi, A., Ranjbar, A. M. and Oraee, H., 2012. Financial analysis and optimal size and operation for a multicarrier energy system. Energy and buildings. 48. pp.71-78.

Baker, H. K. and English, P., 2011. Capital budgeting valuation: Financial analysis for today's investment projects (Vol. 13). John Wiley & Sons.

Doucette, W.R. and et. al., 2012. Three-year financial analysis of pharmacy services at an independent community pharmacy. Journal of the American Pharmacists Association. 52(2). pp.181-187.

Online

Working capital ratio 2017.[Online]. Available through:<https://www.accountingtools.com/articles/2017/5/13/working-capital-ratio>.

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