FINANCIAL ANALYSIS

Understanding the Concepts of Financial Management & Financial Analysis

Section A3

Introduction3

Overview of the Company3

1- Financial Analysis (Profit Earning & Dividend)4

Income Statement Analysis4

Balance Sheet Analysis5

2- Ratio Analysis (Financial Stability and Liquidity)6

Definition & Importance6

Liquidity Ratios6

?Current Ratio6

?Quick ratio7

Profitability Ratios7

?Gross Profit Margin Ratio7

?Net Profit Margin Ratio8

Gearing ratios8

3- Strategic Analysis of the Company10

Swot Analysis10

?Strengths10

?Opportunities10

?Weaknesses11

?Threats11

Product Range of the company11

4- A critical reflection on the company portrayed by journalists and other financial reports12

5- Market Value per Share & Asset value per Share12

Conclusion12

Section B13

1)Annual cash flows for each of the five years13

2) Calculating the Payback, NPV and IRR13

?Net Present Value13

?Internal Rate of Return14

?Payback Period14

References15

Appendix16

Understanding the Concepts of Financial Management & Financial Analysis

Section A

Introduction

Financial analysis helps the investors and creditors to know about various important variables of the company. It gives insight about the how the company is performing and its creditworthiness. Investors and creditors are more inclined towards their returns & repayments respectively. They have to gauge the performance, repayment capacity and the ability of the company to pay rewards to investors before they take any material interest in the company. Financial analysis assists stakeholders to understand the company using ratio analysis & common-size statements i.e. horizontal & vertical analysis.

It helps company in taking long-term and even in short-term decisions. Because of such surmounting importance, it has become integral part of the planning & budgeting of the company. Therefore, financial analysis has significantly influenced the internal management of the organizations too. Financial analysis aids analysts and interested parties relatively easy about the financial health of the company rather swallowing big numbers aimlessly.

Overview of the Company

To address the requirement of our assignment we are selecting a company from alternative investment industry named Stanley Gibbons Group PLC. Company is operating successfully in the alternative investment industry from a number of years. In 1856 company was established by Edward Stanley, and currently its shares are traded on the London Stock Exchange (Peter, T. 2010, Pp. 60-98). Stanley gibbon is incorporated in the New Jersey and is now operating in all key localities of the entire Europe. The company is recognised as the global leader in the alternative investment industry. Company has a market share of 1% around the globe in its industry and that is considered as low. The competitive advantage of Stanley Gibbon is its proven experience.

1- Financial Analysis (Profit Earning & Dividend)

In order to understand the financial performance of our selected company in terms of profit, earnings and dividends, we are incorporating its financial statement for the three years of 2012, 2011, 2010. For the same reason we are going to evaluate the income statement and balance sheet of the company. Analysis of such statements elucidates the effectiveness of Stanley Gibbon's operation in the industry (Stanley, 2011, Pp. 1-40).

Income Statement Analysis

Income statement is one of the four financial statements that a business uses public its financial performance. Income statement helps in elucidating the financial condition of a company for a specific time period lets say for a ...