Financial Report Analysis of a Jute Mill Essay Example for Free

Financial Report Analysis of a Jute Mill EssayMarket opportunity is big factor in shaping a callers schema. Opportunities may be plentiful or scarce. The may range from widely alternative to marginally have-to doe withing. A company is well advised to fall out on particular market opportunity unless it has th e resource capabilities most relevant to a company are i) ii) Those that offer important avenues for paid growth Those where a company has the most potential for completive. Threats Certain factors in a company extend environment may pose threats to i ts positiveness and competitive well-being. Revels introduction of new product New government regulations that is more burdensome to a company than is competitors Vulnerability to a raise in interest rates Political upheaval and the like. It is management job to identify the threats to the companys future well-being and to evaluate what strategic actions can be interpreted to neutralize or lesson their impact. Opportuniti es and threats point to the need for strategic action. Managers need to i. ii. Pursue market opportunities well suited to the companys resources capabilities, and Take action to hold up against internal threats to the company business.Why SWOT analysis? ? It involves evaluating the strengths, weakness opportunities and threats and drawing conclusions about the attractiveness of the companys situation and the need for strategic action. From a strategy marking perspective strengths are significant because they can be used as the cornerstones of strategy and the basis on which to build competitive advantages. ? wariness should build strategy around what the company dose best on the basis of the strengths and should avoid strategies whose success depends heavily on areas where the company is weak. A strategy also needs to aim at correcting competitive weakness that make the company vulnerable, hurt its importance of disqualify it from pursuing an attractive opportunity. ? Strategy es sential be aimed at pursuing opportunities well suited to the companys capabilities and provide a defense against internal threats. Mashriqui Jute Mills Ltd. Consolidated profit and damage account For the year ended 30th June, 2008 Revenue Cost of revenue Gross Profit Operating Expenses Administrative Expenses Distribution (selling) Expenses Profit before Interest, taxation Depreciation Depreciation Net Profit/Loss before TaxTheoretical Illustration Concepts relating to ratio analysis 3. 1 Liquidity proportion o Liquidity refers to the ability of a firm to meet its short -term financial obligations when and as they fall due. o The main concern of liquidity ratio is to legal community the ability of the firms to meet their short-term maturing obligations. Failure to do this will result in the total failure of the business, as it would be forced into liquidation. i) Current Ratio The underway ratio expresses the relationship between the firms current assets and its current liabil ities. Current assets normally include interchange, marketable securities, accounts receivable and inventories. Current liabilities harp of accounts payable, short-term notes payable, short-term loans, current maturities of long term debt, accrued in come taxes and other accrued expenses (wages). The rule of thumb says that the current ratio should be at least 2 that are the current assets should meet current liabilities at least twice. (ii) Quick RatioMeasures assets that are quickly converted into cash and they are compared with current liabilities. This ratio realizes that some of current assets are not easily convertible to cash e. g. inventories. The quick ratio, also referred to as acid exam ratio, examines the ability of the business to cover its sh ort-term obligations from its quick assets only (i. e. it ignores stock). The quick ratio is calculated as follows clearly this ratio will be lower than the current ratio, but the difference between the two (the gap) will indic ate the extent to which current assets consist of stock. 3. 2 Profitability RatioProfitability is the ability of a business to earn profit over a period of time. Although the profit figure is the starting point for any calculation of cash flow, as already pointed out, profitable companies can still fail for a lack of cash. Note Without profit, there is no cash and therefore profitability must be seen as a critical success factors. o A company should earn profits to survive and grow over a long period of time. o Profits are essential, but it would be wrong to assume that every action initiated by management of a company should be aimed at maximise profits, irrespective of social consequences.