Financial reports of Analysis for Dummies - Myassignmenthelp.Com

Question: Discuss about the Financial reports of Analysis for Dummies. Answer: Introduction: This report has been prepared to evaluate and identify the impact of the financial statement of a company over various aspects and the variables of the company. Financial statement is the main reports to analyze the performance and the position of the company in terms of finance. Financial statement analysis is done by the financial analyst, chief financial officer and the investors of the company to analyze and evaluate the position of the company so that a better decision could be made. This analysis also assists the companies to evaluate their market position so that the new diversifications, strategies and policies could be made. In this report, automotive industry has been taken into the concern. This report has been prepared over Marshall Motor Holdings plc. For this analysis, firstly an overview study has been done over the company and the automotive industry. Further, various financial analysis methods have been used to identify the changes into the financial position of the company so that it could be evaluated that how the position of the company has been enhanced. Company overview: Marshall Motor holdings plc is operating its business into international market. The analysis over company depict that the primarily, this company evaluates and performs the automotive industrys work. This company is selling and repairing numerous vehicles related to commercial and passengers purpose. Currently, this company has diversified its market into 25 countries. 103 franchises of this company have contracted with 25 brands of automotive industry to transport the vehicles into the global market (Home, 2017). This company has 28 sites to manage and administer the operations and the performance of the company. Through the analysis over the internal and external factors of the company, it has been evaluated that the performance of the company has been enhanced and it assist the company to manage the position of the company in the industry as well as in international market. Industry Overview: Further, the overview study over the industry depict that the automotive industry is growing up rapidly. The automotive industry share has been enhanced in the economy share. Through the analysis over automotive industry, it has been found that the global presence of the automotive industry is enhancing and due to it the performance of the companies which are performing their business under this industry is enhancing rapidly (Schlichting, 2013). Further, it has been analyzed that the trends of 2017 express that the performance of the companies in this industry have been enhanced: (Strategy, 2017) The above graph depict that the operating margin of the industry has been enhanced and depict about the better position of the industry in the market. Further, it has also been analyzed that the total shareholder return of automotive industry has also been enhanced in last 55 years. Through the study over an article, it has also been evaluated that the industry is planning to set a new road map. This analysis depict that the various new changes have taken place into the position and the performance of the company. Further, it has also been analyzed that the companies of automotive industry have planned various new strategies and the vehicles to enhance their market. The manufacturing and the design of the vehicles are designed by the company in such a manner that the entire clients of this industry could be satisfied and thus the revenue of the industry could also be higher (Phillips and Stawarski, 2016). Currently the automobile rate of the international market has also been enhanced. Financial statement analysis: For analyzing the performance of the MARSHALL MOTOR HOLDINGS PLC in a better way, study has been done over the financial statement of the company. More, it has also been analyzed that how much changes and what changes have taken place into the performance and the position of the company. Further, it has also been analyzed that how these changes have impacted the position of the company. Following are the few changes which have taken place into the position of the company: Calculation of the increment 2016 2015 Sales 1899405000 1232761000 54.08% Operating profit 29054000 18246000 59.23% Earnings 17762000 11721000 51.54% Dividend payment 3251000 15448000 -78.96% Market capitalization 145638000 129884000 12.13% Operating cash flow 80309000 25493000 215.02% Capital expenditure 40754000 -2169000 -1978.93% Debt increment 85444000 28642000 198.32% (Palicka, 2011) The above statement and the table depict that various changes have taken place into the position and the performance of the company. Through this analysis, it has been evaluated that how this position have impacted the performance of the company. From the above table, it has been found that the sales of the company have been enhanced in 2016 from 2015 by 54.08%. Further, it has also been found that the operating profit has also been enhanced with the increment in the sales. More, the earnings of the company have also been enhanced due to good increment in the total revenue of the company (Madhura, 2014). More, it has also been found that the company has reduced the level of the dividend payment to manage the funds in the organization. This has helped the comapny to raise the funds through internal sources. More, the cash flow of the company in terms of operating aspects has also been enhanced by 215.02%. And lastly, the study over capital expenditure and debt increment depict that the organization has enhanced the funds through debt to diversify the market and the expenditure of the company has also been enhanced. Ratio analysis: Further, the study has been done over the liquidity position; solvency position, debt position and the profitability position of the organization to identify the changes which have taken place into the organization of the company. Following are the calculations of the ratio analysis of the company: Financial Data Description Marshall Holdings plc ($) 2016 2015 2014 Revenue 1,89,94,05,000 1,23,27,61,000 1,08,58,83,000 94,05,05,000 79,44,37,000 Cost of goods sold 1,67,89,49,000 1,08,74,52,000 95,97,12,000 82,67,07,000 70,11,53,000 Gross profit 22,04,56,000 14,53,09,000 12,61,71,000 11,37,98,000 9,32,84,000 Operating profit 2,90,54,000 1,82,46,000 1,52,43,000 1,25,72,000 68,81,000 Net profit 1,77,54,000 1,17,14,000 99,36,000 77,32,000 33,05,000 Interest 29,85,000 14,18,000 11,40,000 11,95,000 11,66,000 Inventory 38,00,16,000 24,06,32,000 16,30,11,000 13,49,58,000 11,04,77,000 Current assets 47,51,72,000 30,74,86,000 23,80,18,000 21,43,37,000 15,73,73,000 Receivables 8,46,61,000 3,81,93,000 7,03,01,000 7,49,43,000 4,32,84,000 Current liabilities 58,49,14,000 28,99,70,000 25,14,11,000 21,28,34,000 15,53,40,000 Payables 49,73,40,000 21,24,06,000 22,14,42,000 18,25,44,000 12,86,86,000 Equity 14,56,38,000 12,98,84,000 6,61,20,000 6,06,81,000 5,59,46,000 Total liabilities 65,60,14,000 32,51,19,000 28,70,14,000 24,72,56,000 18,72,75,000 Total assets 80,16,52,000 45,50,03,000 35,31,34,000 30,79,37,000 24,32,21,000 Number of employee 2,250 Description Formula Marshall Holdings plc 2016 2015 2014 2013 2012 Profitability Net margin Net profit/revenues 0.93% 0.95% 0.92% 0.82% 0.42% Return on equity Net profit/Equity 12.19% 9.02% 15.03% 12.74% 5.91% Sales employee Sales / number of employee 844180 Liquidity Current ratio Current assets/current liabilities 0.81 1.06 0.95 1.01 1.01 Acid test Current assets-Inventory/current liabilities 0.16 0.23 0.30 0.37 0.30 Efficiency Receivables collection period Receivables/ Total sales*365 16.27 11.31 23.63 29.08 19.89 Payables collection period Payables/ Cost of sales*365 108.12 71.29 84.22 80.60 66.99 Asset turnover ratio Total sales/ Total assets 2.37 2.71 3.07 3.05 3.27 Solvency Debt to Equity Ratio Debt/ Equity 4.50 2.50 4.34 4.07 3.35 Debt to assets Debt/ Total assets 0.82 0.71 0.81 0.80 0.77 Interest cover EBIT / interest expenses 9.73 12.87 13.37 10.52 5.90 Gearing ratio Long term liabilities / capital employed 0.22 0.24 0.31 0.37 0.37 Return on capital employed Operating profit / total assets - current liabilities 0.41 0.52 0.43 0.37 0.22 (London Stock Exchange, 2017) The above table depict about the various level of the company. Firstly, the study has been done over the profitability position of the company. Firstly, net profit margin of the company has been analyzed and it has been found that the net profit of the company has been enhanced in 2016 (Kinsky, 2011). It depict that the position of the company is increasing continuously. More, the return on equity and the sales of the company in comparison of the employees have also been analyzed and it has been found that the return on equity has been enhanced by 12.19% in 2016. Further, it has also been found that currently the sales per employee of the company are 844180 (Krantz, 2016). Through this analysis, it has been found that the performance and the position of the company have been enhanced and it depict about the better profitability position of the company (Morningstar, 2017). The above table depict about the various level of the company. Firstly, the study has been done over the profitability position of the company. Firstly, net profit margin of the company has been analyzed and it has been found that the net profit of the company has been enhanced in 2016 (Kinsky, 2011). It depict that the position of the company is increasing continuously. More, the return on equity and the sales of the company in comparison of the employees have also been analyzed and it has been found that the return on equity has been enhanced by 12.19% in 2016. Further, it has also been found that currently the sales per employee of the company are 844180 (Home, 2017). Through this analysis, it has been found that the performance and the position of the company have been enhanced and further it express about the better profitability position of the company. Further, the above table depict about the liquidity position of the company. Liquidity position of a company depict about the debt obligation position of the company and the position of the company to pay off all the debts (Horngren, 2009). Firstly, current ratio of the company has been analyzed and it has been found that the current liquidity position of the company has been lowered in 2016. It depict that the position of the company and the policies of reducing the level of the current assets in comparison of the current liabilities is a great step. It would help the company to reduce the level of the extra expenditure. The position of current liquidity position is better according to the industry debt obligation level (Hopper, Northcott and Scapens, 2007). More, the quick liquidity ratio of the company has been analyzed and it has been found that the quick position of the company has also been lowered in 2016 in comparison of last 5years. Through this analysis, it has also been fo und that the company is required to manage the level of the current assets except the inventories of the company. Through this analysis, it has been found that the performance and the position of the company have been enhanced and it depict about the better liquidity position of the company, company is just required to enhance the level of the quick assets of the company (Hansen, Mowen and Guan, 2007). Further, the above table depict about the efficiency position of the company. Efficiency position of a company depict about the total cash conversion process of the company and the position of the company to manage all the operations and current assets and liabilities in a perfect manner (Garrison, Noreen, Brewer and McGowan, 2010). Firstly, receivable collection period of the company has been analyzed and it has been found that the company has reduce the level of the collection period to get the debtors amount quickly. It depict that the position of the company and the policies of collecting the debt amount has been changed and it assist the company to manage the better position. It would help the company to reduce the level of the extra expenditure (Elton, Gruber, Brown and Goetzmann, 2009). The position of cash collection position is better according to the industry and the obligation of the company. More, the payment payable days of the company has also been analyzed and it has b een found that the total payment days of the company has also been enhanced in 2016 in comparison of last 5years. Through this analysis, it has also been found that the company has reduced the payment cycle to enhance the level of the cash in the business (Hansen, Mowen and Madison, 2010). Through this analysis, it has been found that the performance and the position of the company have been enhanced and the cash conversion cycle of the company has also been better. Lastly, the above table depict about the solvency position of the company. Solvency position of a company depict about the total capital structure and the debt of the company in comparison of various other variables of the company (DRURY, 2013). Firstly, debt to equity ratio of the company has been analyzed and it has been found that the company has enhanced the level of the debt in comparison on the equity to reduce the level of the cost in the company. It depict that the position of the company and the policies of managing the debt and equity has been changed but it has impacted over the risk level of the company (Bhimani, Horngren, Datar and Foster, 2008). Further, the debt to assets level of the company has also been analyzed and it has been found that the debt level of the company has enhanced in comparison of total assets in last 5 years. Through this analysis, it has also been found that the company has managed the debt, equity and total assets level to manage the performance and the position of the company. Through this analysis, it has been found that the performance and the position of the company have been enhanced and the company is required to reduce the level of the debt and equity. Horizontal analysis: Further, the financial reports and the statement of the company have been analyzed through the method of horizontal analysis. In this study, it has been analyzed that how much changes have taken place into the each year in comparison of last year. Following are the calculations of the horizontal analysis over income statement and balance sheet of the company: MARSHALL MOTOR HOLDINGS PLC (MMH) CashFlowFlag INCOME STATEMENT Fiscal year ends in December. 2016-12 Changes 2015-12 Changes 2014-12 Changes 2013-12 Changes 2012-12 Revenue 1899405000 54.08% 1232761000 13.53% 1085883000 15.46% 940505000 18.39% 794437000 Cost of revenue 1678949000 54.39% 1087452000 13.31% 959712000 16.09% 826707000 17.91% 701153000 Gross profit 220456000 51.72% 145309000 15.17% 126171000 10.87% 113798000 21.99% 93284000 Operating expenses Sales, General and administrative 3518000 141.79% 1455000 -21.05% 1843000 47.44% 1250000 88.82% 662000 Other operating expenses 187884000 49.58% 125608000 15.15% 109085000 9.11% 99976000 16.60% 85741000 Total operating expenses 191402000 50.64% 127063000 14.55% 110928000 9.58% 101226000 17.16% 86403000 Operating income 29054000 59.23% 18246000 19.70% 15243000 21.25% 12572000 82.71% 6881000 Interest Expense 2985000 110.51% 1418000 24.39% 1140000 -4.60% 1195000 2.49% 1166000 Other income (expense) -3918000 167.44% -1465000 21.07% -1210000 3.95% -1164000 0.09% -1163000 Income before income taxes 22151000 44.18% 15363000 19.16% 12893000 26.24% 10213000 124.36% 4552000 Provision for income taxes 4397000 20.50% 3649000 23.40% 2957000 19.19% 2481000 98.96% 1247000 Minority interest -8000 14.29% -7000 133.33% -3000 0.00% -3000 -40.00% -5000 Other income -8000 14.29% -7000 133.33% -3000 0.00% -3000 -40.00% -5000 Net income from continuing operations 17754000 51.56% 11714000 17.89% 9936000 28.50% 7732000 133.95% 3305000 Other 8000 14.29% 7000 133.33% 3000 0.00% 3000 -40.00% 5000 Net income 17762000 51.54% 11721000 17.93% 9939000 28.49% 7735000 133.69% 3310000 Net income available to common shareholders 17762000 51.54% 11721000 17.93% 9939000 28.49% 7735000 133.69% 3310000 Earnings per share Basic 0.23 15.00% 0.2 53.85% 0.13 30.00% 0.1 150.00% 0.04 Diluted 0.22 15.79% 0.19 46.15% 0.13 30.00% 0.1 150.00% 0.04 Weighted average shares outstanding Basic 77326970 30.12% 59425171 -23.06% 77236263 0.00% 77236263 0.00% 77236263 Diluted 79500548 30.23% 61046875 -20.96% 77236263 0.00% 77236263 0.00% 77236263 EBITDA 49369000 30.37% 37868000 8.11% 35028000 9.40% 32018000 30.34% 24565000 (Ackert and Deaves, 2009) MARSHALL MOTOR HOLDINGS PLC (MMH) CashFlowFlag BALANCE SHEET Fiscal year ends in December. 2016-12 Changes 2015-12 Changes 2014-12 Changes 2013-12 Changes 2012-12 Assets Current assets Cash Cash and cash equivalents 83000 -99.66% 24130000 1221.47% 1826000 3.81% 1759000 18.85% 1480000 Total cash 83000 -99.66% 24130000 1221.47% 1826000 3.81% 1759000 18.85% 1480000 Inventories 380016000 57.92% 240632000 47.62% 163011000 20.79% 134958000 22.16% 110477000 Prepaid expenses 10412000 129.79% 4531000 57.33% 2880000 7.58% 2677000 25.56% 2132000 Other current assets 84661000 121.67% 38193000 -45.67% 70301000 -6.19% 74943000 73.14% 43284000 Total current assets 475172000 54.53% 307486000 29.19% 238018000 11.05% 214337000 36.20% 157373000 Non-current assets Property, plant and equipment Land -100.00% 37381000 13.22% 33017000 20.19% 27470000 5.96% 25924000 Fixtures and equipment 35126000 29.25% 27177000 5.08% 25863000 -5.56% 27387000 9.40% 25033000 Other properties 232468000 112.76% 109262000 10.05% 99281000 7.51% 92343000 5.09% 87868000 Property and equipment, at cost 267594000 53.95% 173820000 9.90% 158161000 7.45% 147200000 6.03% 138825000 Accumulated Depreciation -65783000 -1.13% -66535000 -0.88% -67124000 2.75% -65330000 9.91% -59439000 Property, plant and equipment, net 201811000 88.11% 107285000 17.85% 91037000 11.20% 81870000 3.13% 79386000 Goodwill 121191000 220.69% 37791000 71.35% 22055000 130.05% 9587000 48.59% 6452000 Intangible assets 842000 85.87% 453000 #DIV/0! #DIV/0! #DIV/0! Other long-term assets 2636000 32.60% 1988000 -1.78% 2024000 -5.55% 2143000 21330.00% 10000 Total non-current assets 326480000 121.32% 147517000 28.15% 115116000 22.99% 93600000 9.03% 85848000 Total assets 801652000 76.19% 455003000 28.85% 353134000 14.68% 307937000 26.61% 243221000 Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt 47050000 76.22% 26700000 -5.79% 28342000 0.78% 28124000 5.61% 26629000 Capital leases 30680000 Accounts payable 497340000 134.15% 212406000 -4.08% 221442000 21.31% 182544000 41.85% 128686000 Taxes payable 4602000 -3.38% 4763000 192.75% 1627000 -24.88% 2166000 8564.00% 25000 Other current liabilities 5242000 -88.63% 46101000 Total current liabilities 584914000 101.72% 289970000 15.34% 251411000 18.13% 212834000 37.01% 155340000 Non-current liabilities Long-term debt 7531000 -69.48% 24677000 -2.09% 25205000 4.98% 24010000 14.48% 20973000 Capital leases 33833000 Deferred taxes liabilities 20803000 1003.61% 1885000 5.72% 1783000 -5.16% 1880000 -33.87% 2843000 Minority interest 21000 -27.59% 29000 -19.44% 36000 -7.69% 39000 -7.14% 42000 Other long-term liabilities 8912000 4.14% 8558000 -0.24% 8579000 1.01% 8493000 5.15% 8077000 Total non-current liabilities 71100000 102.28% 35149000 -1.28% 35603000 3.43% 34422000 7.79% 31935000 Total liabilities 656014000 101.78% 325119000 13.28% 287014000 16.08% 247256000 32.03% 187275000 Stockholders' equity Common stock 49531000 Additional paid-in capital 19672000 0.00% 19672000 Retained earnings 76435000 25.75% 60781000 -4.84% 63870000 9.31% 58431000 8.82% 53696000 Accumulated other comprehensive income -100.00% 49431000 2096.93% 2250000 0.00% 2250000 0.00% 2250000 Total stockholders' equity 145638000 12.13% 129884000 96.44% 66120000 8.96% 60681000 8.46% 55946000 Total liabilities and stockholders' equity 801652000 76.19% 455003000 28.85% 353134000 14.68% 307937000 26.61% 243221000 The above study of income statement and balance sheet depict that the various changes have taken place into the position and the performance of the company. This depicts that the performance of the company has been better in 2016 in comparison of last 5 years (Baker and Nofsinger, 2010). Further, it has also been analyzed that few changes could be done by the company to enhance the level of the profitability position of the company. Conclusion: Through the above study, it has been found that the various strategies must be changed by the company to manage the position and the performance of the company. though, the performance of the company has been better from last 5 years but still, few changes should be done by the company to enhance the level of the financial performance of the company. Company must manage the level of the debt and equity according to the industry rules. Further, company should also need to manage a better level of the liquid position so that the risk and return of the company could also be managed. Through the above analysis over MARSHALL MOTOR HOLDINGS PLC and the automotive industry, it has been analyzed that the profitability position of the comapny has been improved and the market share of the company has also been enhanced. Further, it has been found that the trends of the industry depict that various positive changes would take place into the performance of the company in future. Further, it has also been analyzed that few changes could be done by the company to enhance the level of the profitability position of the company. References: Ackert, L. and Deaves, R. 2009. Behavioral Finance: Psychology, Decision-Making, and Markets. Cengage Learning. Baker, H.K. and Nofsinger, J.R. 2010. Behavioral Finance: Investors, Corporations, and Markets. John Wiley and Sons. Bhimani, A., Horngren, C. T., Datar, S. M., and Foster, G. 2008.Management and cost accounting(Vol. 1). Pearson Education. DRURY, C. M. 2013.Management and cost accounting. Springer. 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