Managing Financial Resources

3012 WordsMay 14, 201213 Pages
Managing financial resources Table of Contents 1. Introduction 2. Past Financial Performance of Elim Limited A. Purpose of this Analysis B. The Importance of Standards C. Descriptions of Past Performance 3. Implications of Elim’s Past Performance 4. Information Needs & Its Importance D. List of Decisions E. Information Needs of Different Parties 5. Analysis of Different Strategies F. Cost Control G. New Product Development H. Growth by Acquisition 6. Recommendation 7. Conclusion 1. Introduction We all know that a successful company must have a strong financial performance. In 2008, Elim Limited has reported the first loss in its history. In…show more content…
A simple example is the way to handle depreciation when you report income. As a result, additional due diligence will be needed to assess the financial performance of these companies. Although there exists uncertainties, for the sake of discussion we assume that Elim has followed the established standards in preparing the financial statements for the year ended June 2008. Descriptions of Past Performance The financial performance of Elim in 2008 has not been satisfactory. A loss of $5 million was recorded. Although the retained profit brought from previous years was used to cover this loss, it is certainly not a solution in the long run. To analyze the situation more in-depth, we have used a series of ratios and comparisons. The results are shown in the following table. Type | Ratios / Indicators | Value | Liquidity | Current Ratio | 1.71 | Liquidity | Acid test (quick) Ratio | 1.20 | Liquidity | Cash Ratio | 0.34 | Profitability | Gross Profit Ratio | 40% | Profitability | Operating Profit Ratio | 6.7% | Profitability | Return on Equity | Negative | Profitability | Net Profit Ratio | Negative | Efficiency | Inventory Turnover | 1.5 | Efficiency | Inventory Period | 243.3 | Leverage | Debt Ratio | 0.43 | Leverage | Debt-to-Equity Ratio | 0.77 | Leverage | Interest Coverage | 0.67 | Stock Market | Dividend Yield | 2 | With this, we can identify several facts about the company. First, as
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