Financial Analysis

Financial Analysis

Financial Analysis

Introduction

This report aims to analyze the financial position of Primary Products PLC. The analysis shall be based on the most recent annual financial statements available for Primary Products PLC. The scope of analysis shall be limited to the financial strengths and weakness of the company through its financial statements of the last year and previous years.

Limitations of information gathering

The main limitation of information gathering is that 100% accuracy cannot be guaranteed. There is a small chance that some information gathered are inaccurate or that the source is unreliable. The chance of this occurring is however insignificant. By and large information obtained may be considered to be significantly accurate (Vincent, 2002,432).

Another limitation of information gathering can be information overload. With the advent of the internet so much information is available online. This presents many authors with the challenge of sifting through the vast information available and extracting only the ones that are relevant and useful to the subject of the research project (Linda, 2008,23).

Finally, information available are substantially historical in nature, hence some situations may have been overtaken by events. This measurement is useful in projecting the future outlook of a business, in some cases past trends are not a good indicator of future performance for various economic or business reasons (Thomas, 2001,143).

Methods used in collecting information

All the information gathered were obtained from different stakeholders to ensure that that a balance was achieved in terms of opinions and viewpoints. The annual report and financial review were generated internally so we used that to assess the business and financial position of the company from the company's point of view

Ratio Analysis

The ratio analysis involves comparisons. Different ratios of the company are calculated with the given data of the company from (financial statements and balance sheets). (Frank, 2003)The ratio analysis provides in-depth and timely information to the management for critical strategic decision making (Vincent, 2002,432).

Key Performance Indicators

Key performance indicators provide a series of measures against which management and investors can review the business and determine how it is likely to perform over the medium and long term.

Limitations that may be associated with the use of key performance indicators include;

Lack of clarity and ambiguity in formulating performance indicators.

Setting of unattainable goals.

Accuracy of results gathered and measurements

Performance indicators are an offshoot of a company's strategy hence it may be difficult to compare firms with different strategies even though they operate within the same industry.

Financial Performance

Ratio Analysis

Financial ratios are essentially tools for evaluating the financial statements of a firm with a view to establish whether or not the firm is meeting its business and financial objectives from stakeholders' point of view. By relating two measures of performance in the financial statements we are able to gain insight into the results achieved. Ratios are also used to assess the management's performance and make predictions on the firm's future outlook based on the trend. The following broad classifications of ratios will be used to evaluate the business and financial performance ...