Dalini Lorhendren Company
Introduction
Dalini Lorhendren Company is a company dealing with Toys. All companies require financial reports so as to determine the progress in terms of the debt position and the ability to generate more profit which is the main goal. The special report that is prepared will help the manager and all the internal users to determine the progress of the company within a given specific time. This report will consist of analysis from the profit and loss account, Balance sheet, cash flow statement analysis, and ratio analysis which help in comparing the company able to handle the available short term and long-term debt.
Balance Sheet
To start with is the balance sheet help in providing the financial report of the company’s asset, liability, and the shareholder’s equity within a given time. It helps in computing the returns as wells as evaluating the capital structure of the company. From the company’s balance sheet, it is evident that the company is in a stable condition and it can progress in the future since the total asset and liabilities are equivalent thus the company solvency. From the balance sheet, the ratio analysis computation is easily determined which help in analyzing the company position in terms of the available debts and asset. Comparing movement change of the available asset in April and May represent 0.38% it is evident that a decrease in the number of assets available in the company is notable due to increase in sales in may while a decrease in liability representing an 80% is notable which shows that the company is performing well and making more profit.
Ratio Analysis
The ratio analysis from Dalini Lorhendren Company, for the financial period between April and May 2020 using various ratios from the horizontal analysis report. The net profit margin ratio of the company shows 100% which portrays the company able to compete effectively with the competitors. The current liabilities to net worth represent 0.1 which shows the company reliance on the equity is low for payment of a debt. This shows that the company can remain in solvency and there is no significant pressure on the future cash flow of the company. The current ratio shows the company’s capability to settle the interim debt commitment, and the company holds an 8.8 which indicates that the company can pay all the short-term loan thus it is solvent. The company as well as a debt ratio of 0.6 which shows the relationship between the company debt and assets thus helps in evaluating the ability to serve the long-term debt. This helps to analyses the company proportion in terms of the asset and debt which shows the company able to cater to the long -term solvency. Finally, working capital to total asset ratio help in measuring the company’s ability to liquidity which has 41.5% showing that the company can pay for the current liability using the current asset available.
Profit and Loss Account
In reference to the profit and loss account, it is evident that the company is in a position to make a profit. The net profit represents 77.3% which indicates that the is operating more effectively thus able to increase revenue from the increase in sales which has been reported from the company providing discount rates to the customers. From the analysis, the company can cater to all the expenses incurred effectively. The sales report provides an increase which shows that the company can attract even more customers in the future. Additionally, the company able to make investment show s that it is in a positive financial state to keep its operation and satisfy all the customers.
Cash Flow Analysis
Cash flow analysis help in showing how money has been moving in the company through sales and out through the purchases and expense that are incurred. This report helps the management easily track the movement of capital in and out of the bank account thus hindering any instance of misuse of the company cash. This report consists of three sections which include cash flow from the operating activities which present a positive value showing that the company is in the ability to balance between the debt owed by them to suppliers and the customers. This is evident that the company is operating effectively and it is making a profit as expected. The investing activities in the company present a negative value which reports that there is an aggregate change in the business cash position as a result of the loss made from the previous investment which bore less interest as compared to the higher generating interest which money has been transferred currently. Finally, the financial activities as well present a negative value which indicates that the company’s movement between the owners and the creditor is not effective and therefore the company needs to adjust and ensure that the fund used to run the company is in net flow. Therefore, the management needs to ensure that the debt is well balanced.
Conclusion
The profit and loss account, Balance sheet, cash flow statement analysis, and the ratio analysis help in comparing the company able to handle the available short term and long-term debt as well as the company’s ability to progress in the future. From the analysis, the company can make more sales and attract more customers since it is reporting a net profit. To ensure that the company operates more effectively the company needs to offer more incentives to the customer like offering a free freight cost thus encouraging more sales thus making more profit. Additionally, the company needs to check on the financial activities and invest more to generate more interest which will increase the revenue and the company income. The company ratio analysis shows that the company is in an apposition to cater to both short term and long-term debt which shows the stability to operate more effectively in the future after a few adjustments.