Financila reporting for Summer bodysuit Ltd (SBL) startup company Essay

Financila reporting for summer bodysuit Ltd (SBL) startup order - Essay ExampleThis problem is so serious that the bank has requested the companion to reduce its overdraft for the beside six months, hence worsening its already ailing cash slow. As a member of Drake heed Consultants, who have been mandated to advise the caller-up regarding monetary issues, I have undertaken to write this report, citing the key problems and offering approximately recommendations regarding the problems that the accompany is undergoing. Analysis of the companys financial statements Return on capital employed (ROCE) The ROCE for Summer Bodysuit Ltd (SBL) has increase from 15.9% to 23.8%, which is a favorable trend. This shows that the business has efficiently invested its resources to create scratchs. However, the management should be careful to verify that this rate is maintained at a higher rate than that of borrowing otherwise its benefit may not be realised (Baker and Wurgler 30). Year in the beginning last Last year Profit before Tax 1,668 3,706 Capital Employed 10,474 15,600 ROCE = ((Profit before Tax) / (Capital Employed)) * 100. 15.9% 23.8% Return on fair play (ROE) It is remarkable that ROE has increased from 0.38 to 0.54, be ride this shows that the companys profitability is on an upward trend, hence an assurance to the shareholders that their capital is being apply efficiently to make profits. This trend should be maintained by continuing to invest in remunerative opportunities, though the management should be very careful not to engage in investment decisions that outhouse slow down this positive trend in the future. pay Income 1,248 2,926 Shareholders Equity 3,274 5,400 ROE = gain Income/Shareholders Equity 0.38 0.54 Gross Profit Margin The companys gross profit margin has increased slightly, from 46% to 48%. Although, a slight increase in this ratio is a positive indication of financial health, the management should work hard to ensure the woo of sal es is reduced at a more(prenominal) increase rate so that the companys growth can be speeded up. Incidentally, as the company work out on strategies that can increase the firms revenue, it should not be forgotten that reducing marginal cost of sales is also very essential. Furthermore, what is left after netting cost of sales from the revenue is used for paying for additional expenses as well as for future nest egg (Barry 256). Year before last Last Year Revenue 14,006 22,410 COGS 7,496 11,618 0.46 0.48 Net Profit Margin The Net profit Margin has increased from 8.9% to 13%, which is financially very healthy if this trend continues in the future, the company is likely to grow in leaps and bounds. The management should be on the lookout for the costs that could be increasing at a greater rate than the revenues and control them because this could cause the growth in the net profit margin to decelerate in the future (OConnor 758). Year before last Last year Net income 1,248 2,926 Reve nue 14,006 22,410 Net profit margin = (net income/ revenue)*100 8.9% 13% Inventory Turnover Ratio The companys inventory turnover ratio has declined from 5.79 times to 3.85 times. This declined trend can cause alarm if it is as a result of any goods selling slowly. However, if it is caused by a companys new dodging that has led to increased inventory, and which will lead to overall growth, then this should not be a cause of alarm. However, the management sh