Financial Analysis of SimpleCo Plc.
Alejandra Paola Sanchez Salinas
April 2011 Intake
1. Executive Summary
This report provides analysis and evaluation of the current situation of SimpleCo Plc. Methods of analysis include balance sheet, income statement, cash flow statement as well as ratios.
Results show that the company is very profitable and attractive to shareholders, but trade receivables are too high and might become a risk for the company.
It is recommended that a change in policy regarding credit sales is applied, so that trade receivables are no longer considered as a risk for the company.
Information provided in the assignment is being used, as well as the course book and academic journals.
4.1. Balance Sheet, Income Statement and Cash Flow Statement
Table 1: Balance Sheetof SimpleCo Plc.
It is assumed that both premises and other fixed assets have a life of 5 years
2 This figure shows the negative figure of the net cash flow
The company has invested a lot in its premises, being it 54% of its total assets. It can also be noted that most of their money comes from the issuing of ordinary shares and their earnings, representing 79% of claims.
Table 2: Income Statement of SimpleCo Plc.
There is no corporate tax data, so it is assumed that corporate tax is zero
Because they have invested heavily in fixed assets, depreciation is their highest cost, being almost 47% of total costs, salaries and wages comes next with almost 40% of the total cost.
Even though they have just started the business, they have a positive profit, which is a good indicator.
Table 3: Cash Flow Statement for SimpleCo Plc.
Net cash flow from operations is low, considering the profit that the company has had, because trade receivables has absorbed more cash than the profit itself. There has been a net outflow of cash for investing activities, this is...