FINANCING

Financial Accounting: TASKS 1-5

Financial Accounting: TASKS 1-5

Task 1

Introduction

The task is related to the financial performance of the Luminar which is engaged in the ownership, development and operation of themed bars, nightclubs and restaurants. Luminar's brands include the Liquid, Oceana, Lava & Ignite, Life, Chicago Rock Cafe and Jumpin Jaks. For the company, it is important to work on the financial performance as it guides both the company and also the investors to make the appropriate decisions.

Overview

The financial performance of Luminar shows that the major portion of the company's assets is comprised of liabilities; which is not a good indication for the company as the company's short term and the long-term debts are increasing. However, the company's equity seems good or satisfactory but it should be high as compare to the liabilities. In addition to this, the total assets per share and net assets per share reflect that the Luminar's assets structure is in good shape which shows that the company can meet its financial obligations that are liabilities are some sort of financial loss occur. In addition to this, past studies states that the financial analysis are to determine whether there are liquidity problems, the study of profitability determines the evolution of the company and return on invested capital, management and analysis of related variables involved in the short-term financing, obtaining rotations and time of collection and payment means.

Key Financials

(As of 2011)

Income Statement

Revenue

193m

Net Income

-22m

EPS - Net Income - Diluted

-0.35

Revenue per Share

3.18

Balance Sheet

Total Assets

554m

Total Liabilities

287m

Shareholders' Equity

267m

Net Assets per Share

4.39

Cash Flows

Cash from Operations

32m

Cash from Investing

-24m

Cash from Financing

13m

Cash Flow per Share

0.53

Ratios (For Calculation- See Appendix)

As it is known that the most important factors in the well being of a business, is to see that it operates at a profit and to organize it in order to be able to meet its liabilities at appropriate times. If either of these points is not covered efficiently it could mean that the business might have to be closed down. This is the reason why we choose to calculate profitability and liquidity ratios which are the most important and reliable guides. In addition, various past studies states that we decide to calculate activity ratios in order to see how efficiently the company like Luminar has managed its debt management ratios, asset management ratios and per share values to commend upon the Luminar's sources of finance and whether a risk arises from increased debt.

Profitability Ratios

2011

2010

ROA % (Net)

-3.84

0.67

ROE % (Net)

-7.5

1.11

ROI % (Operating)

4.17

7.13

EBITDA Margin %

5.43

12.42

Calculated Tax Rate %

29.52

10.4

Liquidity Ratios

2011

2010

Quick Ratio

0.52

0.2

Current Ratio

0.63

0.75

Net Current Assets % TA

-4.53

-3.21

Gearing Ratio

2011

2010

LT Debt to Equity

0.66

0.49

Total Debt to Equity

0.66

0.49

Asset Management

2011

2010

Total Asset Turnover

0.34

0.35

Receivables Turnover

25.83

27.09

Inventory Turnover

88.06

85.89

Accounts Payable Turnover

64.58

54.55

Property Plant & Equip Turnover

0.62

0.66

Cash & Equivalents Turnover

11.1

18.6

Evaluation

Profitability Ratios

The profitability of Luminar is unsatisfactory as the trends of the company from 2010 to 2011 shows that the company has been increasing its profits. This statement can be endorsed by the evaluation of the profitability ratios. The return on assets of Luminar from 2010 to 2011 is reflecting that profitability structure of the company is increased from ...