ipl-logo

Financial Analysis: Dyson Electrical Spares Ltd.

2160 Words9 Pages

Introduction: How business accounts can be interpreted and better understood
Analysis helps us understand how efficient a business is, its overall health and where it stands compared to competitors. There are four techniques that can be used to analyse, interpret and understand business accounts.
One technique is vertical analysis. Catherine Gowthorpe (2011) explains that it involves expressing each figure in the income statement or statement of financial position as a percentage of either sales or net assets. It is used to identify if any expense (e.g. costs of goods sold) is too high when compared to sales.
Horizontal analysis compares account balances and ratios over time periods, such as a company’s sales in 2012 to its sales in 2013. Dyson …show more content…

An increasing fixed assets turnover ratio shows they are making efficient use of their fixed assets each year. These assets are property and equipment and are used in the process of production, supply of goods or administrative purposes.
Electrical Spares Ltd’s gross profit margin trend has also increased over the three years. This could be due to their efficient use of fixed assets, improvement in sales efficiency or due to renegotiation with suppliers to get better rates or buying inventory when discounts are available.
The company’s mark up has increased 4.7% from 2012 to 2014. The low mark up percentage in 2012 may have been to stimulate extra sales activity. The mark up may be high in 2014 because as Weetman (2010) suggests, if Electrical Spares Ltd is a market leader, they can command higher prices because of their reputation. Efficient use of fixed assets may have increased production or supply of goods, therefore more demand and higher mark up.
On the basis of Electrical Spares Ltd’s net profit margin, business performance seems to have improved but only slightly. The drop in net profit in 2014 could relate to the mark up increase in that year. It is possible that customers and competitors thought they were charging too

Show More
Related
1064 Words | 5 Pages

Thus, they are in a position to cover any debt obligations that may come up quickly. Their inventory turnover has been relatively steady over the five years of data. In year 7 their inventory turnover reached 3.2 which means inventory is moving through to customers at an increased rate over the year which correlates with their increased sales. This statement is supported by the fact that the days inventory held for stoves has dropped over the past five years from 146 days in year 3 to 114 days in year 7. These reductions have allowed for the reduction of their days in accounts payable from 51 all the way down to 11.

Read More
813 Words | 4 Pages

The profit margin percentage

Read More
547 Words | 3 Pages

The company uses accrual method whereby expenses and income are recorded when they are earned or incurred. The company’s accounts are organized into charts of accounts. The charts of accounts are divided into Assets, Liabilities, Equity, Revenue and Expense.

Read More
365 Words | 2 Pages

Companies all over the globe will experience some sales and profit decrease. Home Depot in the growing housing industry benefited greatly from the houses being built. The accounting concept portrayed in this situation for home depot is called operating leverage. Operation leverage is when managers view a small change in revenue and magnify it to dramatic changes in revenue (Edmonds, Tsay, & Olds, 2011). With a decrease in the market for construction materials, Home Depot is experiencing a 3% decrease revenue and a 21% decrease in profitability.

Read More
848 Words | 4 Pages

This way we are able to analyze the business’ strengths, weaknesses, opportunities, and threats. We next look at the operations, the financials and marketing plan to see where the company is exceling and where they are struggling. We provide

Read More
1572 Words | 7 Pages

Conclusions Based on Analysis According to the annual reports from both Home Depot and Lowe’s, Home Depot held an advantage over Lowe’s in the big box home improvement retail industry. As of 2016, Home Depot operates 2,278 stores in the United States, Canada and Mexico, and Lowe’s operates 2,129 stores worldwide. The metrics collected to measure the financial performance of these two large scale competitors in the retail industry are very important to determine the overall success of the company. Key financial metrics to be considered for retailers include profit margin, inventory turns and sales per square foot.

Read More
904 Words | 4 Pages

The company will be carefully analyzing the results of sales (profit made, number of units sold, and revenue generated). The results of sales

Read More
1277 Words | 6 Pages

When recording financial activity of a business, “any increase in expense (debit) must be offset by a decrease in assets or an increase in liability (credit)” (Routh 464). Any expense for any office supplies decreases cash or increases accounts payable. Each account is assigned a number to enter data in a list of categories “to track the sub-accounts of assets, liabilities, income, expenses, and equity” (Routh 464). This is a way to bookkeep the charts of accounts.

Read More
220 Words | 1 Pages

In the first half of 2007, Home Depot saw a dropped in sales of 3% which had a devastating effect on their net profits which witnessed a 21% decline. The difference in cost behavior structuring established at Home Depot is the culprit behind the inconsistency between sales and net profits deterioration. Unfortunately for Home Depot a majority of their cost structure is comprised of fixed asset cost therefore, changes in sales result in more volatile to revenue. The fixed asset structure effects the operating leverage and having an increased fixed asset cost proportion increases leverage and volatility.

Read More
426 Words | 2 Pages

This statement summarizes the financial activates of the business they can be prepared at any point such as at the end of year, quarter or monthly. To break down each one of these Financial Statements are the following. (Quantitative approaches to managerial decision making. P.G. 9-50). (1).

Read More
895 Words | 4 Pages

The pumps that the Wilkerson company produces are the “bread and butter” of this company. These products are produced at a high rate with a high price competition. As stated earlier, due to the severe price cutting by the competitors, the pre- tax margin of the company dropped extremely low to 3% percent and gross margin to 19.5%. Another product that the company produces are valves. The valves have remained steady around its planned gross margin of 35% with actual of 34.9%; these products are sold and shipped in huge bulk.

Read More
1770 Words | 8 Pages

Therefore on that basis, all products, including pumps would be generating substantial contribution to overhead and profits. Therefore, given the overhead allocation problems, Wilkerson’s best bet would be to adopt the variable costing method for various reasons, as follows: 1. This cost concept provides a better understanding of the effect of fixed costs on the net profits, due to the fact that total fixed cost for the period is shown on the income statement. 2.

Read More
3531 Words | 15 Pages

Analysis of Financial Statements Student number: 10221450 Word count: 2993 words Excluding Bibliography Course code: B9AC106 Course title: Financial Analysis Lecturer: Mr. Enda Murphy Company: Whitbread PLC   Table of Contents 1. Whitbread plc 3 Financial Ratio Comparison 6 1.1 Profitability Ratio 6 1.2 Liquidity Ratio 9 1.3 Efficiency Ratio 11 2. Intercontinental hotels group plc and Ratio Comparison with Whitbread 12 3. 10% Stake in Intercontinental Hotels Group PLC 13 Conclusion 16 Market Value and Book Value

Read More
545 Words | 3 Pages

Owners also analyse these financial statements by using ratios to assess the performance of the business and this will indicate the areas where they can make improvements. Employees look at the statement of profit or loss to see if the business has enough money to cover their salaries and they also analyse the financial statements to see if the business can continue paying them their salaries in the future. Investors analyse the financial statements of a business and use ratios to assess the risk and returns of their investments. Potential investors compare these ratios to the financial ratios of other similar businesses.

Read More
782 Words | 4 Pages

Scope of Financial statements analysis: International Financial statement analysis Robinson, Greuning, Henry, Broihahn 2009, According to Framework for the Preparations and presentation of financial statements (international Accounting Standards Committtee, 1989)The role of financial reporting by companies is to provide information about their performance, financial position, and changes in financial position that is useful to a wide range of users in making economic decisions. The purpose of financial statement analysis is to evaluate the past, current, and future performance and financial position of the company for the purpose of making investment, credit, and other economic decisions. Financial statements are the end results of an accounting record-keeping process that records the economic activities of a company.

Read More

More about Financial Analysis: Dyson Electrical Spares Ltd.

Related Topics

Open Document