Business Report Template example

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Business Report Template

Table of Contents

Literature Review 3

Financial Statements Analysis 3

Capital Policy 6

Internal vs External Financing 6

Capital Structure and Market Value 7

SWOT Analysis 9

Methodology 9

Methods 9

Data 11

Study 11

Financial Statements Analysis of First Derivatives Plc and Servelec Group 11

Vertical (Common-size) Analysis of Financial Statements 12

Horizontal Analysis of Financial Statements 14

Ratio Analysis 17

Liquidity Analysis 17

Operating Efficiency Analysis 20

Financial Solvency Analysis 22

Profitability Assessment 25

Investor Assessment 28

DuPont Analysis 29

Altman’s Z-score model 30

SWOT Analysis 31

SWOT for First Derivatives 32

SWOT Analysis for Servelec Group 33

Conclusions 34

Discussion 34

Limitations of Ratio Analysis 35

Recommendations 36

Reference List 37

Appendix A: Financial Statements of First Derivatives Plc. 40

Appendix B: Financial statements of Servelec Group 43

Appendix C: Spreadsheet Used 45

Literature Review

This part discusses existing literature on financial analysis and capital structure. The part also considers strategic analysis using the SWOT approach. The key of the literature review is to consider different theoretical approaches to financial management and analysis. The primary focus is on capital structure and its financial implications. The part covers horizontal, vertical analyses of financial statements and trend analysis. In addition, literature review also discusses ratio analysis. This part also mentions financial risk analysis and the DuPont model to link capital structure and financial performance. Literature review also covers capital structure and two different approaches – irrelevance of the capital structure proposed by Modigliani and Miller and the optimal capital structure.

Financial Statements Analysis

Financial statements analysis is based on the key financial statements – balance sheet, income statement and statement of cash flows. The paper considers four different methods of the financial statement analysis – vertical (common-size), horizontal and trend analysis and ratio analysis.

Vertical (Common-size) Analysis

Vertical analysis allows for structural analysis of a company’s financial statements. Common-sized statements evaluate the structure of the statements. As Gitman and Zutter (2012) suggest, the vertical analysis is useful for comparison of the financial statements across different years. The method shows how a company’s financial position changed throughout a period. According to Reilly and Brown (2012), common size statements normalize different items of the financial statements. For a balance sheet, all items are presented as a percentage of total assets, for a common size income statement normalization is based on sales (Reilly and Brown, 2012). The analysis helps to consider the changes in capital structure from a year to year just by looking at the common size statements. The vertical analysis of income statement enables users of financial statements to consider the changes in a company’s profitability. Therefore, common-size help to analyze the structure of the key financial statements.

Horizontal Analysis

Horizontal analysis is used to evaluate the changes in financial statements throughout a particular period. As mentioned by Horngren, Harrison and Oliver (2012) and Elliott and Elliott (2011), the method a compares a company’s financial statement from different periods. This enables users …

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