FINANCE MANAGEMENT

MBA Finance Management Assignment



Table of Contents

Executive Summary2

Introduction2

Financial Ratios3

Profitability Ratios3

Efficiency ratios5

Investment Ratios7

Gearing Ratios8

Part 2: Use of Financial Ratio Analysis for Assessing the Performance of a Business9

Potential liquidity problems10

Managing the working capital11

Reflection of the company's cash position11

Decision making and planning12

Conclusion13

References14

Appendix15

MBA Finance Management Assignment

Executive Summary

This report provides a comprehensive comment and analysis of the financial performance of Monitors PLC. In doing so, an in depth trend and comparative analyses were carried out. The findings of this report indicate that the company has been performing well in the areas of liquidity and share marketabability. Howevever, the company is found to be highly leveraged and therefore bearing high burden for interest payments, as indicated through poor interest coverage. The report suggests that the company reconsider its capital structure as such, and direct itself towards being more equity financed than it is now.

Introduction

Financial analysis is an integral part of the decision making process. Analyzing the financial stability of the electronic manufacturing firms like Monitor PLC is immensely important.  Financial ratio analysis not only helps gauge a firm's performance, it also helps decision making for investors and creditors. Financial performance refers to the methodical evaluation of the financial situation of an organization, person or a project.  Several methods of financial analysis exist; however, ratio analysis is considered the most efficient in determining the financial position and performance of an organization. In attempting to analyze financial statements through the use of financial ratios organizations should have the expertise to interpret them in order to bring about positive changing in the organizational performances. The report provides an in depth analysis and interpretation of the ratios to extract meaningful information for decision-making process from the shareholder's or investor's perspective. In doing so, this report gauges the company's performance against a similar sized competitor, as well as against the business sector norm. The financial data sets the basis of the analysis. For the purpose of this report, financial data for the period 2008-2011 was obtained. Although the analysis in this report pertains to the accounting year 2011, it also uses the past data (2008-2010) to determine the trends and directions of the company's financial performance. In part 2, the report explores the areas where the company needs to review its financial indicators, and suggest ways (recommendations) on how to improve its goodwill and credit line amongst its creditors, bankers and other lenders.

Financial Ratio Analysis

A detailed financial analysis of the Monitor PLC is provided here onwards, which encompasses various aspects of financial information. Financial ratio analysis will cover the profitability, efficiency, liquidity and the leverage of the company. The financial performance that follows is evaluated and analysed from the perspective of shareholder.

Profitability Ratios

Profitability ratios explain the performance of an organization in terms of the profit it earns. They include return on ordinary shareholders' funds, return on capital employed, gross profit margin and net profit margin. In the following table, Monitors PLC ratios are compared for the trend, same size competitor ...