ANALYSIS OF FINANCIAL STATEMENTS
SUBMITTED TO: SIR NOUMAN SHAFI
SUBMITTED BY: ANUM HABIB
M.B.A - 3
Financial analysis of ABC & CO. :-
The ABC & CO is following a different trend as compared to that of the industry. The companies liquidity ratio is decreasing while that of industry is increasing. The liquidity ratio of the company is not in critical position but still it has decreased from the 1992-1993. The company is not in a comfortable position to pay off immediate liabilities. The operating cycle of the company is not revolving smoothly. Activity ratio is also indicating downward trend. Average ...view middle of the document...
On one hand debt has increased while on the other hand the companies ability to pay interest has decreased. Company is sailing in dangerous waters as it is too much dependent on debt financing. The profitabilty ratios has also decreased. Profit margin on sales , return on total asset and return on common equity all these are decreasing. This is due to decrease in income, and this income has decreased because the company is not receiving its cash payments as quickly as it should hd received. Due to allarming signs of ABC & CO. has fallen down in the stock market and consequently the price to earning ratio and book value per share has received a negative effect. As debt is dependent upon profit and debt is increasing and profit is decreasing the company will not be able to meet its debt.. thats why times interest earned ratio has decreased.
The company can pull itself out of this serious position by selling out inventory because if a company posseses a high amount of inventory its simply a waste of money. It also causes added inventory storage, obsolescence and spoilage cost. The company should take some measures to increase its ability to convert its accounts present in balance sheet into cash. By this the income will increase. When income will increase profitability would increase and company woujd be able to shake off its debts. When this cycle will come into action company ABC will be in a better possition in the market.