Student’s name Essay Example

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    1
  • Words:
    518

Analysis Report

Student’s name

ANDREWS COMPANY LIMITED

PERFORMANCE REPORT and FORWARD PLANNING

EXECUTIVE BOARD OF MANAGEMENT

TABLE OF CONTENTS

4Executive Summary 1.0

4Forward Planning 2.0

53.0 Conclusion and recommendation

1.0 Executive Summary

The report gives in-depth information of the company performance analysis and the way forward which should be adopted by the management of the firm. The report has identified three main areas which should be given major consideration in the forward planning. These areas include return on assets which is very low as it stands at 2.19% which is a poor indicator of the internal efficiency. The second one is the return on equity which is currently stands at 5.09% which is a poor profitability turn out from the share holder’s equity. Lastly the days of working capital are too long indicating inefficiency in the capital investment. The report ends by giving conclusion and recommendation which includes employing total quality management, investment diversification and reduction of working capital days.

2.0 Forward Planning

ROA— Return on the Asset is a sure indicator of the company efficiency and whether the company continues to earn or not. The value of ROA is 2.19% giving a very poor indication of the efficiency and this should be looked at. The return on assets is the comparison of assets and revenue of a firm and is given by Net income divided by total asset. This figure gives the earnings which were generated from the capital invested during a given time. The company Andrews ltd has a very lower ROA of 2.19% indicating that it does not convert the invested capital into net income and revenue though it does it at a slower rate. The company should invest more so that it can generate more income commensurable to its invested capital invested by share holders.

ROE – is the return on equity, it gives the amount of net income returned as a percentage returned on shareholders’ equity. The higher the ROE the better the firm’s performance hence low ROE of 5.09% indicates poor profitability performance hence the company management should consider revising investment strategy so that the shareholders can get maximum return on their capital. The profitability of the company can be boosted through investment diversification.

Days of Working Capital is given by (average working capital*365)/Annual sales Revenue. The faster or the shorter the working capital days the better, 67 days is a long working period and the firms needs to shortened the working days period.

The company should employ total quality management and other initiative of sustainability which will enable it to reduce cost like administrative, materiel and labour cost so that the revenue can be maximized. The firm should improve the research and developments through shortening the days so the production department continuously improves its product. High quality product will result into high demand for the product which later will result to high market penetration hence share

3.0 Conclusion and recommendation

  1. The company management should employ total quality management (TQM) initiatives

  2. The company management should diversify the investment opportunities to increase it Revenue

  3. The company should reduce the working capital days.