FINANCIAL ANALYSIS

Financial Analysis



Financial Analysis

Forecasted Income Statement for the Year ended Dec 31 2012

Pessimistic

( £ )

Most Likely

( £ )

Optimistic

( £ )

Annual Sales

335000

360000

400000

less :

Purchases

180000

195000

220000

Gross Profit

155000

165000

180000

less :

Operating Expenses

Administrative expense

30000

30000

30000

Distribution costs

35000

35000

35000

Total Operating Expense

65000

65000

65000

Operating Profit

90000

100000

115000

less :

Interest Expense

4000

4000

4000

Net Profit

86000

96000

111000

Balance Sheet for the year ended Dec 31 2012

Pessimistic

Most Likely

Optimistic

ASSETS

( £ )

( £ )

( £ )

NON - CURRENT ASSETS

Motor Vehicles

140000

140000

140000

Depreciation

28000

28000

28000

112000

112000

112000

Fixtures and fittings

200000

200000

200000

Depreciation

50000

50000

50000

150000

150000

150000

Computers

60000

60000

60000

Depreciation

18000

18000

18000

42000

42000

42000

Total NON - CURRENT ASSETS

80000

80000

80000

CURRENT ASSETS

Cash

- 18000

2000

12000

Stocks

45000

56000

68000

Prepaid Admin Expense

110000

110000

110000

A / R

35000

30000

40000

Total Current Assets

172000

198000

230000

Total Assets

252000

278000

310000

CAPITAL AND LIABILITIES

Owners Capital

400000

400000

400000

Drawing

32000

32000

32000

368000

368000

368000

Current Liabilities

Trade Payable

5000

0

5000

Accrued dis. Cost

6000

6000

6000

Total Current Liabilities

11000

6000

11000

CAPITAL AND LIABILITIES

379000

374000

379000

Cash Flow Forecast for the year ended Dec 31 2012

Pessimistic

Most Likely

Optimistic

RECEIPTS

( £ )

( £ )

( £ )

Sales Receipts including trade debtors

300000

330000

360000

Sales of Motor Vehicle

7000

7000

7000

Total Receipts

307000

337000

367000

PAYMENTS

Cash paid for purchases including trade debtors

185000

195000

215000

Administrative expense

30000

30000

30000

Distribution costs

35000

35000

35000

Loan interest

4000

4000

4000

New purchase of Motor Vehicle

45000

45000

45000

Personal Drawings

32000

32000

32000

Total Payments

331000

341000

361000

Cash Flow

- 24000

- 4000

6000

Opening Bank

6000

6000

6000

Closing Bank

- 18000

2000

12000

Introduction

As the bank manager of Central East Bank, the financial position of the company seems stable for the application of the loan of £ 40000. In addition for providing the loan to the company, three possible happenings are considered that is pessimistic, most likely and optimistic. All of these cases show different results as in each case the financial position of the company in the company year that is 2012 may change.

Discussion

For the Central East Bank, it is important and essential to consider all the aspects of the company's financial statements for providing the loan of £ 40000. The income statement, balance sheet and cash flow position of the company for the year 2012 shows that the company will perform well in all the three operating assumptions that is pessimistic, most likely and optimistic.

However, there are few negative points are observed by the Central East Bank, like in the case of cash flow, in the pessimistic operating assumption, there are possible chances that the cash flow of the company will be in negative. This negative cash flow will affect the financial performance of the company as the company will face difficulty in meeting its immediate liquidity requirements (Anthony and Marcia, 2005, 14-16). The cash flow of the company is a measure that represents the cash inflow from operating activities generated net funds during a period. The measure provides an assessment of the financial health of a company in the sales process, how the necessary funds for the asset maintenance of the balance shown net assets can generate for expansion and investment themselves.

The Central East Bank focused on the various aspects of the company that is capacity of the borrower as a legal entity, fixed assets of the enterprise and the history of the client. In the capacity of the borrower as a legal entity, the Central East Bank found that the based on the founders' documents is determined by registration date, registration number and the authority has registered a company form of ownership of the founders, the amount of paid-up capital, the description of permitted activities, the powers of the managers in the execution of credit agreements. The Central East Bank studies the size and structure, whether they belong to the company owners ...