LQHND商务会计.doc

LQHND商务会计.doc

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Background

SSPplcisacompanyoperatingfoodmanufacturing.Mainlyengagedinthefoodprocessing,provideallofthemajorsupermarketchainsmeatandfirst-rateprocess.Inthepastfewyearsthecompanyhasbeendifficult,becauseofthemadcowdiseaseandhand,footandmouthdisease,makeareducemeatdemandtheproduct.Badperformancestopin2004andininpartonthemarketfromthereboundturnoverbynearly15%increase.Itisexpectedthatthisreboundmomentummarketwillgatherinthecomingyear,theSSPplcisplanningtogotogreaterpace,openanewprocessingplantinGlasgow.

Accordingtothechiefexecutivememorandumofthe30days,thisismeto2003and2004SSPplcfinancialconditionanalysisreport.

Outline

Themainbodyofthereportwillevaluatefiveparts:

Part1---Analyzetheusersoffinancialinformationandthepurposeofusing.

Part2---Stateoffinancialsourceandcategorizewiththeircharacteristics.

Part3---ExplainthecashflowstatementofSSPplc.

AnalyzetherecentfinancialperformanceandpositionoftheSSPplc.

（Includingmyrecommendationsabouthowtoimprovementofbusinessperformance）

Findings

Section1.Usersoffinancialaccounts.

UsersoffinancialstatementsisaorganizationorgroupUSESinformationevaluationanddecisionmaking.Financialinformationuserscanbedividedintotwocategories:

internalandexternalcustomers.

Now,Iwilluseawatchtoyouthepurposeandusetheirusersofinformationsourcesreports.

Section2.Sourceoffinances

Torunabusiness,organizationsrequirefinancefordifferentproposesandforvaryinglengthsoftime.Infinance,capitalsourcesofdifferentdividedintotwobroadcategories:

equitycapitalandloanmoney.Equitycapitalisbytheownerandfinancialnotinterestedtopay.Loancapitalistopointtoaborrowedmoneyfromsourcesoutsideofthebusiness.Theinterestsoftheloancapitalmustpay.Financialaspectsofthesourcecanmakeclearintheshort,mediumandlongterm.Referstoborrowashort-termfinancialnomorethanoneyear.Themiddleisafund,borrowa2to10years.Longtermisafund,borrowaperiodofmorethan10years.

Inthesourceofcasestudy,theSSPplcfinancialcondition:

tradecreditors,tax,bankoverdraft,corporatebonds,thecommonequityandretainedprofitsfromlastyearperiodofaccount.

Short-termsources:

1.Tradecreditors:

Tradecreditorsareproducedwhenthepurchaseofrawmaterialsorstockisdelayingtopay,thus,thereismorecashwhichwouldbeusedforotheruses.Thereisalsoaninterestfreewayofraisingfinance.However,thecreditcouldleadtopoorrelationswithsuppliersandthecustomersmayforfeitdiscounts.

Thecreditis£544,000in2003anditdecreasedto£405,000in2004.Thepercentageofdecreaseis25.56%.ThedecreaseofcreditinfersthatSSPplchasagoodfinancialsituationthatithasastrongabilitytopaycreditsbacktosuppliers.Thiscouldimprovetherelationshipwithsuppliers.

2.Bankoverdraft:

Bankaccountholderscanprearrangewiththebanktodrawchequestoagreatervaluethantheactualbalanceintheaccount.Interestshouldbepaidbycustomersandbankchargeswillapplywhereanoverdraftlimithasbeenexceeded.Bankoverdraftisflexibleandcheap.Ithasalowcost.Somesmallbankoverdraftevenhasafreeofcharge.

SSPplchadnooverdraftbutthenumberincreasedto£86,000in2004.TheincreaseshowsthatthecompanyborrowedmoneyfrombankforitsexpansioninGlasgow.

Long-termsources:

1.Debentures:

Debenturesareloansmaketocompaniesthatcarryafixedrateofinterest.Thecompany’sfixedassetsnormallysecuredebentures.Debentureshaveafixedtimeperiodoranopentimeperiod.Theshareholdersarenotdebentureholders.Adebentureinterestispaidasanexpensenotanappropriationofprofit.

SSPplchasafixeddebenture（£1,560,000）intheyearof2003and2004.Ittellsusthecompany’sfixedassetsaresteady.

2.Ordinaryshares:

Ordinaryshareholdersreceivingpay-outsfromcompanyafterpreferenceshareholdersarepaid.Ordinarysharedividendsarenotfixedandsubjecttocompany’speriodicalperformancesanddecisionsofmanagementinpayingdividend.

InSSPCompany,theordinarysharecapitalis£1,950,000inboth2003and2004.Itinfersthatthecompanyhasasteadyoperationsituation.

3.RetainedProfits

Theretainedprofitisthefinancebroughtfromthelastfinancialperiod.Itisnotfixedandmaybeanegativenumber.Itpresentsoperationalsituationoflastperiod.

Theretainedprofitsdecreasedfrom£505,000to£420,000.Thepercentagechangeofdecreaseis16.83%.Thelowerratioshowsusthecompanyhadmadefewerprofitsin2003thenitwasin2002.

Section3.RatioAnalysis

1.MajorinflowsisNetcashflowoperatingactivatesof£1,345,000.

MajoroutflowisPaymentstoacquirefixedassets,whichtakes£984,000.

2.RatioAnalysis

ProfitabilityRatios:

²GrossProfitPercentage=Grossprofit/Turnoverx100%

2003:

GPP=£7,000,000/£11,674,000x100%=59.96%

2004:

GPP=£8,037,000/£13,382,000x100%=60.06%

Trend:

Increase

Analysis:

thepositivetrend,canincreasethesurfaceinventorycontrolthequalityofmeatproducts,orprocurementpolicyhasimproved.Managersshouldkeepgoodmomentum,continuetodevelopit,suchasimprovingmarketingstrategy,andcreatebetterpricingstrategy,inventorycontrolorimproved.

²NetProfitPercentage=NetProfitbeforeTaxation/Turnoverx100%

2003:

NPP=£1,182,000/£11,674,000x100%=10.13%

2004:

NPP=£901,000/£13,382,000x100%=6.73%

Trend:

Decrease

Analysis:

weknowthatalthoughtotalprofitincrease,highoperatingcostsmuchmoreisin2004,itleadstoreducenetprofit.Sothemanagershouldthinkabouthowtoreducetheoperationcost,helpourcompanymakemoreprofit.

LiquidityRatios:

²CurrentRatio=TotalCurrentAssets/TotalCurrentLiabilities

2003:

CR=£1,195,000/£767,000=1.56

2004:

CR=£1,248,000/£701,000=1.78

Trend:

Increase

Analysis:

generallyspeakingahealthyflowrateisatleast2:

1.1.56and1.78showthecompanyisalittlemorethantrade,andinthemeetitsshort-termdebtdifficulties.Themainreasonfortheincreaseisincreasetotalcurrentassetsandflowdowntheirtotaldebt.Isuggestthatthecompanycanmakemoreprofitfortheshort-termdebt.

²TheAcidTestRatio=LiquidAssets/CurrentLiabilities

2003:

（£1,195,000-£608,000）/£767,000=0.77

2004:

（£1,248,000-£796,000）/£701,000=0.64

Trend:

Decrease

Analysis:

reduceisabadsign.Thisratioshouldbe1:

1.Butthanintwo,in2003and2004forlessthanone.Unfortunately,thisratioisstillfalling.SSPplcliquidityproblemstomeetcurrentassetstoreduce.Companymanagershouldpayattentiontothisthanthedevelopmentofandorganization.

EfficiencyRatios:

²FixedAssetTurnover=Turnover/FixedAssets

2003:

£11,674,000/£4,017,000=2.91times

2004:

£13,382,000/£4,318,000=3.10times

Trend:

Increase

Analysis:

Wherethisratiogasincrease,thisisagoodsign.Itindicatesthattheexistingfixedassetsaregeneratingmoresalesandmaybeinvestmentinnewfixedassetsgascouldbebeenpaidoff.ManagersofSSPplcshoulddevelopandfocusonit.

²DebtorsCollectionPeriod=Debtors/Turnoverx365

2003:

£306,000/£11,674,000x365=9.57days

2004:

£452,000/£13,382,000x365=12.33days

Trend:

Increase

Analysis:

ItisabadsignthatthereisanincreaseinDCP.ItindicatesthatSSP’smayhaveapoorcreditcontrolofpoorinvoicingsystem.Thebaddebtsmayalsoincrease.TheleadersofSSPshouldchecktheirinvoicingandremindersystemtokeeptheratioaproperrange.

InvestmentRatios:

²InterestCover=ProfitBeforeInterest&Tax/InterestCharges

2003:

£1,416,000/£234,000=6.05

2004:

£1,135,000/£234,000=4.85

Trend:

Decrease

Analysis:

theratioshowsthatthecompanycancovertheinterestexpense.Thedecreaseisbad,becausethecompanyisnotabletomeetitsinterest.However,theproportionisinareasonablerange.Leadersshouldtrytoincreaseacompany'sprofitstokeepthisthanahighlevel.

²DebtRatio=TotalDebts/TotalAssetsx100%

2003:

（£767,000+£1,560,000）/（£4,017,000+£1,195,000）x100%=44.65%

2004:

（£701,000+£1,560,000）/（£4,318,000+£1,248,000）x100%=40.62%

Trend:

Decrease

Analysis:

thisisagoodsignthattheincreaseoftheproportion.However,anappropriateproportionshouldkeeparound50%.Itshowsthat,theSSPlessresponsibilityorkeepassets.Banners/signshouldbetomanager.

3.Recommendation

AfterreadingandanalyzingthreeaccountsfromSSPCompany,IfoundsomeproblemswithitandnowIwillpresentmysuggestionsaboutthefuturemanagementinthesetwoparts.

Operationalrecommendation

Theratioofnetpercentageshowsus,theSSPprogrammablecontroller（PLC）inthehighspendingtheoperationcost.Italsoshowsthatthecompanyhasalowcostcontrol.So,Isuggest,theSSPshouldtrytoreducethecostofsalesandoperationcosts,suchasthenewmanagementsystemandusethecontractorfounddistributionchannelsbuttofindtheirown.

Financialadvice

Forthesourceoffinance,SSPhasabadperformanceoffinancialoperating.IntheCashFlowStatement,theFinancingis£0,butthecompanyisplanningexpansioninGlasgow.Mainintoisthecompany'ssales.Thisisadangerousphenomenonifthecompanywantstousesalesreachbroadbusiness,becauseitisimpossibletousecurrentcashsupportlong-terminvestment.SoIsuggest,thiscompanymayincreasethenumberofequityandbondstogetmorelong-termcapitalexpansion.

Conclusion

ByanalyzingtheP&LAccount,BalanceSheetandCashFlowStatement,wecaninferthatSSPplchasagoodoperationalperformance.However,therearestillmanypartstoimproveanddeveloptohe