Introduction
The purpose of this report is to analyse and report on the financial performance of Sioux Appliances. It was requested by Baz, the sole owner of Sioux Appliances, and is to be submitted by Friday 5th of June, before 5:00 p.m. The scope of this report includes discussing the factors of: Profitability, Liquidity, Stability, and Asset Utilisation. The report is only restricted to the aforementioned points as there was a constraint on time frame so other topics could not be covered. A limitation of this report is that there was only five hours allocated before submitting to Baz. Also, the report only takes into account where discrepancies are, not where the exact problems are occurring.
Profitability
• Profitability is the ability …show more content…
Poor performance in the profitability area will lead Sioux Appliances into bankruptcy if changes are not made, in this region Baz needs to focus on areas of gross profit, net profit on equity. In terms of liquidity, Sioux Appliances have been able to pay their debts as they fall due, they are most likely able to pay their obligations because expenses has generally decreased over the three years, this isn’t necessarily a positive because their profit is decreasing. The downfall of Sioux Appliances’ long-term solvency means that any profits that they make have to be used for paying back whatever loans and interest they have, the degradation also means that they have a less likely chance of being able to borrow money from lenders which would make it even harder for them if they want to expand. If Sioux Appliances don’t begin to utilise assets effectively then they will incur the consequences of lower quality inventory and theft of inventory could be …show more content…
Sioux Appliances could offer discounts to debtors if they paid in full on time. Although Sioux Appliances have a terms of trade policy implemented, they haven’t enforced it properly so they could also apply interest costs on debtors who have an outstanding balance. Baz could also hire a debt collector that chases debtors on a daily or weekly basis.
• Sioux Appliances need to ensure that the accounts receivable figures they have calculated can actually be received and they are not just bad debts or doubtful debts. Ensuring that they stay above the 2.00:1 benchmark is a priority for Sioux Appliances. Repairing the liquid ratio affiliates with the reparation of the current ratio in that accounts receivable needs to be monitored and corrected where need be.
• One way that Sioux Appliances could improve their debt situation is to offer someone or another business to buy their assets then Sioux Appliances could lease them back. By doing so it allows them to bring funds into the business quickly but they also able to use what they need to operate. Another way would be for Baz to introduce a partner or investor, this is an unfavourable option but it would indefinitely decrease his debt to
The purpose of this report is to analyse and report on the financial performance of Sioux Appliances. It was requested by Baz, the sole owner of Sioux Appliances, and is to be submitted by Friday 5th of June, before 5:00 p.m. The scope of this report includes discussing the factors of: Profitability, Liquidity, Stability, and Asset Utilisation. The report is only restricted to the aforementioned points as there was a constraint on time frame so other topics could not be covered. A limitation of this report is that there was only five hours allocated before submitting to Baz. Also, the report only takes into account where discrepancies are, not where the exact problems are occurring.
Profitability
• Profitability is the ability …show more content…
Poor performance in the profitability area will lead Sioux Appliances into bankruptcy if changes are not made, in this region Baz needs to focus on areas of gross profit, net profit on equity. In terms of liquidity, Sioux Appliances have been able to pay their debts as they fall due, they are most likely able to pay their obligations because expenses has generally decreased over the three years, this isn’t necessarily a positive because their profit is decreasing. The downfall of Sioux Appliances’ long-term solvency means that any profits that they make have to be used for paying back whatever loans and interest they have, the degradation also means that they have a less likely chance of being able to borrow money from lenders which would make it even harder for them if they want to expand. If Sioux Appliances don’t begin to utilise assets effectively then they will incur the consequences of lower quality inventory and theft of inventory could be …show more content…
Sioux Appliances could offer discounts to debtors if they paid in full on time. Although Sioux Appliances have a terms of trade policy implemented, they haven’t enforced it properly so they could also apply interest costs on debtors who have an outstanding balance. Baz could also hire a debt collector that chases debtors on a daily or weekly basis.
• Sioux Appliances need to ensure that the accounts receivable figures they have calculated can actually be received and they are not just bad debts or doubtful debts. Ensuring that they stay above the 2.00:1 benchmark is a priority for Sioux Appliances. Repairing the liquid ratio affiliates with the reparation of the current ratio in that accounts receivable needs to be monitored and corrected where need be.
• One way that Sioux Appliances could improve their debt situation is to offer someone or another business to buy their assets then Sioux Appliances could lease them back. By doing so it allows them to bring funds into the business quickly but they also able to use what they need to operate. Another way would be for Baz to introduce a partner or investor, this is an unfavourable option but it would indefinitely decrease his debt to