URGENT Business Analysis and Interpretation Essay Example

FSH and NBL analysis 12

Financial analysis of FSH and NBL companies

Financial Analysis of two companies namely SFH and NBL.

The calculations that we are going to make include: Quick ratio, profit margin, current ratio, debt ratio and cash cycles. This calculation will help us track the performance of the two companies by looking at one after the other

Summary of NBL company Net profit and profit margin

Net profit margin for the last three financial years

Net profit margin from report on 06/016 in $millions

(T. Revenue – T. Expenses)/T. Revenue = Net Profit/T. Revenue = Net Margin.

From the report, total Revenue=$136.9 million.

Total expenses=$110 million.

Net profit=Total revenue-Total expenses.

=$136.9-$110.

=$25.9 million.

Net profit margin=Net Profit/Total Revenue

=25.9/136.9=0.1892.

Net profit margin from report on 06/015 in $millions.

(T. Revenue – T. Expenses)/T. Revenue = Net Profit/Sum of Revenue = Net P .Margin.

From the report, total Revenue=$125 million.

Total expenses=$167.4 million.

Net profit=Total revenue-Total expenses.

=$125.9-$167.4.

=$-42.4 million.

Net profit margin=Net Profit/Total Revenue

= -42.4/125= -0.3392.

Net profit margin from report on 06/014 in $millions.

(T. Revenue – T. Expenses)/T. Revenue = Net Profit/T. Revenue = Net P. Margin.

From the report, total Revenue=$116 million.

Total expenses=$179.4 million.

Net profit=Total revenue-Total expenses.

=$116-$179.4.

=$-63.4 million.

Net profit margin=Net Profit/Total Revenue

=-63.4/116=0.5466.

Table of profits and profit margins for NBL Company for the last three years.

Profit in $millions

Profit margin in $millions

Looking at above records of profit and profit margin we can see that the performance of the company was improving tremendously.

Summary of SFH company Net profit and profit margin

Net profit margin for the last three financial years

Net profit margin from report on 06/016 in $000

(T.Revenue – T. Expenses)/T. Revenue = Net Profit/T. Revenue = Net P.Margin.

From the report, total Revenue=$856538.

Total expenses=$840324

Net profit=Total revenue-Total expenses.

=$856538.- $840324

Net profit margin=Net Profit/Total Revenue

=16214/856538=0.0189

Net profit margin from report on 06/015 in $1000.

(T.Revenue – T. Expenses)/T.Revenue = Net Profit/T. Revenue = Net P.Margin.

From the report, total Revenue=$811772.

Total expenses=$832926.

Net P=T.R-T.E.

=$811772-$832926

=$-21154

Net P margin=Net P/T. Revenue

= -21154/811772= -0.0261.

Net profit margin from report on 06/014 in $000.

(T .Revenue – Expenses)/T. Revenue = Net Profit/T Revenue = Net P. Margin.

From the report, total Revenue=$810750.

Total expenses=$722719.

Net P=T. Revenue-T. expenses.

=$$810750-$$722719.

=$88031.

Net P. margin=Net Profit/T. Revenue

=$88031/$810750.=0.1086.

Table of profits and profit margins for NBL Company for the last three years.

Profit in $000

Profit margin

From the above data, we can see that from 2014, The Company’s performance has not been doing well. There is fluctuations in performance as depicted by loss in 2015 and subsequently a negative profit margin.

Comparison of NBL and SFH basing on Profit margin.

Basing on profit margin, it is clear that NBL is performing better than SFH.

If we also look at the profits, we can see that NBL is ahead.

Calculation of current ratio for the last three years.

Current ratio (CR) is used to show the liquidity status of the company.

NBL company current ratio for year 2016.

In $millions.

CR=Total C. assets/Total C.liabilities.

=26/22=1.18

NBL CompanyCR for year 2015.

CR=Total C assets/Total C liabilities.

=19/19=1.00

NBL company current ratio for year 2014.

CR=Total C. assets/Total C. liabilities.

=19/15=1.27.

Calculation of CR for the last three years for SFH.

SFHCompanyCR for year 2016 in $000

CR=Total C. assets/Total C. liabilities.

=117913/115305=1.02.

NBL company CR for year 2015.

CR=Total C. assets/Total C. liabilities.

=114635/99647=1.15

NBL company current ratio for year 2014.

CR=Total C. assets/Total C. liabilities.

=115524/103258=1.11.

Comparison of CR for NBL and SFH.

The two companies are performing better if we look at the current ratio. All ratios are above one. However there is fluctuations in both companies. The worst fluctuation is in SFH where there is drop for the last year from previous year.

Quick ratio

Quick ratio(QR)is used to gauge a company whether it can meet its operational responsibilities.

QR = (T.C. assets – inventories) / T.C liabilities,

Quick ratio for NBL Company.

Year 2016

In tune of ‘000.

= (26-11)/22

Year 2015

= (19-10)/19

Year 2014

=19-11/15

Quick ratio for SFH Company.

Year 2016

= (117913-103082)/115305

=14831/115305

Year 2015.

== (114635-101657)/99647

Year 2015

= (115524-108689)/103258

Comparison of quick ratio for NBL and SFH.

Generally there is high quick ratio for NBL than SFH. There is also an upward trend in both companies in quick ratio showing that the companies are heading to the better direction.

Debt Ratio (D.R)

Shows the total companies assets that have been acquired by debt.

You can get DR by dividing Total liabilities by Total assets.

Debt ratio for NBL Company since 2014

2016 debt ratio in $millions.

=Debt ratio =Total liabilities/Total assets.

2015 debt ratio.

Debt ratio for 2014

Debt ratio for SFH Company since 2014.

Debt ratio for 2016 in ‘000.

=165375/220995

Debt ratio for 2015.

=150824/216292

Debt ratio for 2014

=157655/224213

Comparison.

The two companies have high debt ratio which shows that most of their assets are financed by debt. However, it is even higher in SFH than in NBL.SFH is heading to the wrong direction.

Cash cycles.

Cash flow cycle is the period between giving out and receiving cash.

Cash flow.

Cash flow cycle=Inventory conversion period (ICP) + Receivables conversion period (RCP) – Payables conversion period(PCP)

ICP = Average. Inventory / (COGS / 365)

RCP = Average. Accounts Receivable / (Credit Sales / 365)

PCP = Average. Accounts Payable / (Purchases / 365)

Cash cycle for NBL 2016 in tune of $millions

ICP=10.5/ (13/365)

RCP=2/ (2/365)

PCP=18/1/365

Therefore, cash flow cycle=291.6+400+600

=$1291.6

Cash flow for SFH. In ‘000

ICP=88894/ (5682/365)=7709

RCP=5976/(-588/365)=-5151.72

PCP=83495/ (-322/365)-94880.68

Therefore, cash flow cycle=7709-5151.72-94880.68=-92322.752

Comparison for Cash cycle.

The negative value obtain for SFH Company shows that there is less cash in circulation for the company. NBL is doing slightly better in this.

Recommendations.

It is very clear that SFH is not performing well and is below its competitor in many aspects.

The following are the recommendations to the manager:

  • Reduce the debt.This is seen from the debt ratio where SFH has got the highest.

  • Increase aggressive marketing to improve cash cycle. This is still down was at 2016 where there are no cash in circulation.

  • Assets should be acquired using the cash available rather than on credit. This is because credit increases in interest increasing the overall cost of item acquired on credit.

References.

[1] White, G.L., Sondh, A.C. and Fried, D., 2005. Analysis of Financial Statement in companies. 

[2] Wild, J.J., Bernstein, L.A., Subramanian, K.R. and Halsey, R.F., 2004. Financial statement analysis. McGraw-Hill.

[3] Helfert, E.A. and Helfert, E.A., 1994. Techniques of company financial analysis: A guide to managing, analyzing and measuring business performance (No. 658.15). Irwin,.