Financial Analysis And Business Sustainability Of Company

Computation of Return on Assets

The choice of business of the company depends upon the firm structure, type of business and which promoters should undertake on the basis of internal and external factors. In this report financial analysis and business sustainability of company. It observed that promoters needs to analysis whether the starting up new business will be as per the requirement of the  curt and Simon.

It is analyzed that the return on assets determines the company’s efficiency to deploy funds in the business to create more return on investment.  This ratio is computed to analysis the industry in which company is working.

The return on assets in the previous year was 9% which decreased in 4%.   Company has created value on its investment.

Return on investment has also increased which shows that company has crated value on its investment since last one year.  It is calculated by using the formula net profit/ net investment. The calculation of thee ROI has shown that company normally expects 15% but after analysing the detail, it could be inferred that company is having only 13% return on investment which is low as compared to last year data 

  The net profit ratio of company has increased. It is observed that higher net profit margin reflects that company has higher profitability and consistently creating value on the investment. The Snow Company in previous year has 28.7% net profit margin which increased by 2% and resulted to 30% net profit margin. The increase in the net profit margin shows the positive indicator for the organization

The current ratio shows company’s ability to pay off its short term an long term debts out of the current assets. It reflects the extent to which it could meet its libiliteis. The idea current ratio should be 2:1. However, after analysing the data of Snow company, it is inferred that the current ratio of company is 1.27 in current year which is .30 times higher as compare to last year data. It shows that company has created good value of investment in its business and consistently meting the targets

The debt ratio of company reflects the relation between the debt and equity portion of company. It is observed that debt ratio is calculated by dividing the total debts with the total assets. It indicates the financial leverage which company is managing in its business

After analysing the details, it could be inferred that the debt ratio of company has increased to 61% which is 13% higher as compared to last year data. It shows that company has increased its financial leverage with a view to reduce the cost of capital of company

Computation of Return on Investment

The assets turnover ratio reflects company’s measurement to value of its sales with respect to the invested capital in the assets. It shows company’s efficiency to deploy funds in business. The asset turnover ratio measures the value of the sales of the company with respect to the value of the assets. The higher assets turnover ratio reflects company better ability to perform in market. IT is analysed that Snow Company has 0.42 times assets turnover ratio which is .o5 times higher as compared to last year data.

The receivable turnover ratio shows how well The Snow Company has managed its cash blockage by adjusting receivables.   The previous year  receivable turnover ratio  shows that company has increased its Receivables turnover ratio to 21 times which is 6 times higher as compared to last year data

1.

The choice of business of the company depends upon the firm structure, type of business and size which company needs to undertake for running the business effectively. In this case, Kurt and Simon both were sole traders and were having fixed and variable cost in their busienss.  The main offered proposed by the Simon for the bike club was undertaken to cut down the cost of both parties  It is evaluated that if these both traders continue as sole traders and then the bifurcation of the cost will be done accordingly between both parties for instance, camping and equipment is to be borne by Simon itself and the cost of lodging and food expenses is to be borne by Kurt itself. Due to this the visitors will get scattered at time and this will create hassle. The form of the partnership which has been undertaken by Simon and Kurt will be limited  these both parties will have separate ownership and management.

If in case company is formed then the ownership could be transferred by transferring the shares to others.  However, incorporate the company will requires complex legal compliance which may increase the complexity and increased cost of the process. It is further observed that if these both partners undertake the partnership then it will eventually increase the overall outcomes and reduce the legal compliance.

Selection of the form of corporate

It is advisable for both of them to undertake the partnership firm to start up mutually agreed business. In this partnership all the right and liabilities will be determined on the basis of the agreement made by both parties on the mutual understanding 

2

There are several formalities which need to be complied by both parties before commencing the Adventure tours business.

• Registration of the company and incorporation rules and regulations will be followed.
• Determination of the types of corporation such as partnership and limited partnership and company
• Financial contributions for the funding and appreciation of the business.
• Name of the companies and corporate objectives.
• The directors list and partnership program

3.

There are several recommendations have been given to promote the Adventure tours business

• Use of digital media and online promotional program.
• Publishing brochures and pamphlets for the off line promotion.
• Advertisement in article an newspapers
• Use of survey methodology and sample survey to customized the products and services as per the client’s needs.
• Giving attractive offers and discounts to new members to take services from our organization

Conclusion

The form of the partnership which has been undertaken by Simon and Kurt will be limited. If they want to implement the effective business in long run then they will have to analysis all the positive and negative factors for implementing the effective strategic program.

References

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Kaya, D. and Koch, M.,. Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence. Accounting and Business Research, 2015., 45(1), pp.93-120.

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