FINANCIAL ANAYLSIS

Financial Analysis



Financial Analysis

Introduction

Financial statements are financial data documents a company publishes on an annual, biannual, quarterly or monthly basis. These documents include the company's net worth based on assets and liabilities, as well as the company's expenses, earnings and operational budget. Financial planners and accountants may use financial statements to make decisions regarding future planning, expansions and product launches, but there are disadvantages to using this method.

Financial statements reveal how much a company earns per year in sales. The sales may fluctuate, but financial planners should be able to identify a pattern over years of sales figures. For example, the company may have a pattern of increased sales when a new product is released. The sales may drop after a year or so of being on the market. This is beneficial, as it shows potential and sales patterns so executives know to expect a drop in sales.

Another advantage of using financial statements for future planning and decision making is that they show the company's budgets. The budgets reveal how much wiggle room the company has to spend on launching products, developing marketing campaigns or expanding the current office size. Knowing how much money is available for planning and decision making ensures that the company does not spend more than expected.

Evaluation

Profitability Ratios

The profitability of Blacksea Plc is satisfactory as the trends of the company from 2009 to 2010 shows that the company has been gaining profits. This statement can be endorsed by the evaluation of the profitability ratios. The return on assets of Blacksea Plc from 2009 to 2010 is reflecting that profitability structure of the company is raised from 7.09 to 9.86. In addition to this, return on equity shows decline over the 2 years. As the return on equity was 297.9 in 2009 and 133.33 is in 2010. In addition to this, return on investment and operating profit margin is also showing the increase in the profitability structure of InterContinental Hotels Group. Furthermore, the operating profit margin shows an increase over the years. The operating profit margin was 6.63 in 2009, whereas it increases in 2010 to 33.6. This could be as a result of increase in the gross profit margin.. Besides it, the tax rate is reached to 25.87 from 0 which seem to be a positive sign for the InterContinental Hotels Group, and the over all performance of the company is satisfactory.

Liquidity Ratios

The liquidity ratios that include current ratio, quick ratio and net current assets as a percentage of total assets are increased from 2009 to 2010. This shows that the liquidity position of the Blacksea Plc is satisfactory. The current ratio increased from 0.4 to 0.49 from 2009 to 2010 respectively and the quick ratio increased from 0.32 to 0.42 from 2009 to 2010; this shows that the goods sold are partially financed by suppliers (creditors). In addition to this, the net current assets as a percentage of total assets increased from (21.91) in 2009 to ...