FINANCIAL MANAGEMENT

Financial Management

Financial Management

Introduction

The given case study deals with the canteen of an organization, which was primarily formed in order to serve the employees of the firm, however it was presumed that it will earn enough to bear its own expenses. In order to do so, the canteen, Tulip Refractory, acquired loan from the parent company for its initial set up and in order to meet its initial costs. However, it can be observed that they have not paid the loan installment for last three years. The management of the mother company is concerned about the performance of their canteen department and as compared to the canteen of their sister company, Café 88, the performance of Tulip Refractory is not satisfactory as it is still operating in losses.

In this report, we will be discussing the factors which should be taken into account for the performance if Tulip Refractory and the key areas which will indicate the reasons of its performance. In order to do so, we will also be looking into the methodology and the parameters which are required for this analysis.

Methodology of Analysis

The analysis of a Tulip Refractory must go with the analysis of the financial statements, regardless of size or activity. To perform financial analysis of a company, two elements are essential; the income statement and the balance, over the same period. The study of these states should not be achieved by addressing all the figures shown, but we must identify the significant elements that make up these financial statements. We will not address the financial analysis of a company in detail as a complete work would be needed for this study.

The analysis of balance sheet

The company's balance sheet represents his heritage, we shall detect everything including the company has in its possession, and all debts vis-à-vis partners and vis-à-vis third parties; it has in return (also known as jobs and resources). The financial analysis of a company is through the study of the result for the year and prior years the equity of the company, located at the top of the balance sheet, is an indication of the value of a company. When dividends are distributed annually, it should be taken into account because these distributions reduce the amount of equity;

Two companies make the same profit each year, one distributes all, the other does not; the first one distributes each year and will have less equity than the second business because it never distributes, but yet these two companies will have a similar profitability. The indebtedness of the company; it will here analyze the debts of the business including borrowings, payables, tax and social security. A company which is in too much debt may have liquidity problems in the future. Fixed assets of the enterprise can also be used to analyze the company where we have to focus on the assets of the company because they are important indicators, such as date of realization of investment or what are the elements that need to be ...