Zara's Financial Statement
1. Zara’s financial statement analysis
The financial statement is recognized as an efficient method of communicating the company’s financial status and statistics to its shareholders (CILT, 2014a, p. 17). In addition, it aims is to provide a detailed description of where the company stands from a financial perspective along with its performance in a specified period. Hence, an organization can plan and set their future economic decisions based on their performance reflected in the financial statements (CILT, 2014b, p. 18).
1.1. The Profit and Loss Statement
First, the profit and loss statement is one of the factors that indicates how financially healthy a company is, considering it as the reflection of the company’s cash flow. …show more content…
Nevertheless, the growth of expenses is a consequence of the new stores openings, as Zara’s new stores area share was slightly higher than 50% of the total new stores opened area which was about 4.5 million square meters (Inditex , 2017, p. 2).
Thus, Zara’s remarkable amount of net income can be estimated as 60% of the total net income of Inditex, which was calculated as €3.2 billion in 2016. Based on the P&L statement of 2016 given and analyzed, it can be concluded that Zara is a healthy company from a financial perspective. Although the statement is a general description of the performance of the entire companies which are part of Inditex; still, Zara’s contributions represents more than the half of it, with notable growth in sales and revenues along with the expansions in stores.
1.2. Balance …show more content…
To begin with, the assets are one of the factors, as they include the total cash, property and equipment the company maintains. According to (Inditex , 2017, p. 13), by the end of 2016, Inditex stores expanded to 7,292 stores around the globe. Yet, Zara’s share from this expansion represented more than the quarter of this number, as Zara had 2,067 stores operating by the end of same period. Furthermore, as indicated earlier, the cash flow in Zara’s company is smooth as their revenues exceeded their expenses. Equally important, another two aspects to analyze involve the owner’s equity and liabilities. As demonstrated earlier, Zara is a large influencer to the financial position of Inditex. Hence, despite the fact that Inditex’s total liabilities and owner’s equity, which Zara contributes too, was accounted to €19,621 million. Still, the company is generating enough profit which allows them to stay beneficial and expand further. Consequently, according to CILT (2014a, p. 14) it can be concluded that a company is maintaining a healthy financial position, when they have enough cash to fulfil the company’s requirements and to expand further, which is what Zara’s financial statements