preview

Essay on Analyzing the Performance of Benedon Limited Company

Decent Essays
Open Document

Analyzing the Performance of Benedon Limited Company

I am writing a report to analyse the performance of Benedon Limited
Company and to compare with the industry as a whole. The report analyses company and industry performance over the three years up to at end of 20X3. “It enables us to discover favourable or unfavourable trends that are developing gradually over time, as well as pointing up any numbers that have changed sharply in the space of time of just one year.” (Sytsma, S.) This report reviews the findings of the major changes and the awareness of weak performances. However, there are five principal types of ratios which are profitability ratios, liquidity ratios, activity ratios, solvency ratios and investment
ratios. …show more content…

“These margins are often watched closely, as changes can be early warning signals of serious problems. A slacking off of a percentage or two in the gross margin can mean the difference between healthy profits or a loss in many industries.” (Sytsma, S.)

“Liquidity ratios attempt to assess whether a firm is maintaining an appropriate level of liquidity. Too little liquidity raises the possibility of default and bankruptcy. Too much liquidity implies that long-term investments with greater profitability have been missed.
Financial officers have to walk a tightrope to maintain enough, but not too much liquidity.” (Sytsma, S.) According to the figures in
20X3, liquidity has been worsening compared to 20X2 because Current
Ratio and Quick Ratio have both decreased despite of the growth from
20X1 to 20X2. The current ratio has been decreased almost 50% from year 20X2 which was 1.78 to 0.90 in the year 20X3. On the other hand, the industrial average figure for current ratio in year 20X3 is 1.20.
This means the cash is illiquid; Benedon Limited may not be able to meet the expenses and paying short debts as well.

In activity ratios, the cash cycle has obviously increased substantially from 49 days in year 20X2 to 221 days in the year 20X3.
Although the stock days have reduced from 62 days in the year 20X2 to
51 days in 20X3, the debtor days have raised significantly to 198 days in year 20X3. It is possibly due to Benedon Limited is not able to
sell

Get Access
Related
Get Access