Financial consultant reportAs a Financial consultant for Springbox plc, I will be considering four tasks which have been set to consider an investment within the business.
My first task is to produce a commentary on the recent financial performance of the business. After comparing the figures from 2005 and 2006 it is apparent the sales turnover has not increased, this is a worrying start when considering any businessÃÂs accounts as the sales turnover should increase even slightly. The cost of sales has risen and this could be a result of poor management, price elasticity of demand and or suppliers may have increased prices yet the business has not increased the price to cover costs. There has been a very noticeable increase in administration and distribution expenses, it is unclear why this expenses has risen but it should be considered further by the business.
The return on capital employed in 2005 was 24.6%
and has since fallen in 2006, this is below the industry average which is 25%, this is a clear indication there is a decline in profitability, management efficiency and in performance. The time in which the business is receiving money from their debtors is reasonably high; the business is waiting as long as 77 days for creditor payment and the standard time is 30days this is not a good factor when looking at the cash flow. It is of high importance to have a good credit control to be able to purchase and use the cash flow in other areas.
Financial report of Springbox plcTaking the financial statements of the business in 2005 and 2006, it is important to consider the following areas:1. Profitability2. Efficiency3. Liquidity4. Gearing5. InvestmentFinancial ratios provide and quick and simple way of assessing the financial health of a particular business. A ratio relates one...