Part 1:
Ratio Analysis:
i)Current Ratio: Current Assets/ Current Liabilities
2009: 147000/ 42000= 3.5
2010: 153000/ 45000= 3.40
ii) Gross Profit Margin= Gross Profit/ Revenue*100
2009: 240000/620000*100= 38.70%
2010: 275000/682000*100= 40.32%
iii) Inventory Turnover Ratio: COGS/ Inventory
2009: 380000/120000= 3.16
2010: 407000/120000= 3.39
iv) Return on Investment = Net profit after interest and tax / Total Assets
2009: (7800/277000)*100= 2.81%
2010: (16580/265000)*100= 6.25%
b)
Summary:
Referring to the above calculated ratios of the company for the year 2009 and 2010, we could infer that overall the latter year indeed was a profitable for the company. However, during 2010, the liquidity of the company declined marginally from 3.50 to 3.40. As for the profitability, the gross profit margins of the company increased from 38.70% to 40.32% courtesy improved sales figures and controlled cost of goods sold. The inventory turnover ratio of the company also increased from 3.16 to 3.39 indicating that it not takes less time for the company to sell their inventory and capital is tied up in inventory levels for lower period of time. The company will also be ecstatic to find significant improvement in their ROI multiple which increased from 2.81% to 6.25%. The increase resulted from sustainable increase in Net Profit after taxes which increased from $7800 to $16580 during 2010.
The profit projections of the company are also encouraging under the listed assumptions. During 2010, the net profits of the company are $16580 which seems to magnify to $114968.40. Overall, the financial performance of the company is sustainable and encouraging.
Part 2:
Answer 1)
Refer to spreadsheet tab 3
Answer 2)
Refer to spreadsheet tab 3
Answer 3)
Answer 4)
Profit percentage projections for Sports Store Pty Ltd:
Answer 5)
Answer 6)
Cover Letter
With 12 years of consultation and analysis experience, I assure you that I will make immediate contribution to your team’s requirements. Before starting with the discussion of various business opportunities, I will like to layout the rights and responsibilities of my clients:
Rights:
- Right to be treated in a professional manner and to be served in a courteous and caring manner irrespective of race, ethnicity, religion, age or sex.
- Right to ensure that all the private information to be held confidential to the extent permitted by law.
- Right to choose the preferred service without any enforcement.
- Right to be provided safe environment when accessing the facilities
- Right to ensure that all the analysis or any other kind of professional services hired are in compliance with own objectives.
- Right to lodge a complaint against any unprofessional or unethical behavior in terms of services provided.
Responsibilities:
- Provide accurate information about yourself in order to receive the best service.
