Introduction - Spokes Active Performance: Key Financial Metrics
Financial analytics is the method of organising a firm's accounting data for a given accounting period on account of comprehending the financial performance throughout that period. After "financial accounting" is performed, a comprehensive "financial insights" is performed for a firm to understand the future financial performances of that firm. This report is prepared by "Wilkie & Co", a financial consultants' company. The financial analytics report is prepared based on the financial data of ”Spokes Active Limited", headquartered at Whaley Bridge that deals in outdoor sports equipments that began its "online sales activities" last year (year 2). The charts are prepared on the three years financial performance of Spokes Active Limited and a forecast of its financial performance of the company for the next year (year 4) is also presented in this report.
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Financial Position of "Spokes Active Limited" for years 1-3
The values of the company's "total assets" and "total liabilities" for the three consecutive years are provided in Figure 1 as per the recorded financial data.
Figure 1: Financial Position of "Spokes Active Limited" for years 1-3
As per Figure 1, the values of "Total Assets" of "Spokes Active Limited" are reported as £175,252 for year 1, £103546 for year 2 and £90,017 for year 3 indicating a consecutive decline in the value of the company's resources. The values of "Total Liabilities" of "Spokes Active Limited" are reported as £197,439 for year 1, £101,430 for year 2 and £79,127 for year 3 indicating that the company had performed well in reducing its total debts and obligations over the three years. Despite the decline in the amount of its assets, the company has managed its funds efficiently over the three years mentioned as any decrease is "liabilities" is an indication of increase in "cash outflows".
Financial performance of "Spokes Active Limited" for years 1-3
The values of the company's "revenue", its "gross profit margin", its "operating profit margin" and its "net profit margin" are presented for the three consecutive years (years 1-3) are calculated as follows in Figure 2.
Figure 2: Financial performance of "Spokes Active Limited" for years 1-3
As per Figure 2, the values of the company's revenues are reported as £161,366 for year 1, £383,662 for year 2 and £453,142 for year 3 indicating an impeccable growth in the company's earned revenues over the three consecutive years (Aydiner et al. 2019). The values of the company's "gross profits" stand at £27,570 for year 1, £28,303 for year 2 and £42,984 for year 3 from which it is derived that the company has performed moderately better at year 2 than its previous year, however, in year 3, the company's performed very well in matters of earning "gross profit". The values of the company's "operating profits" from year 1 to year 3 are reported as £-18,287, £28,303 and £42,984 respectively. The values of the company's "net profit" from year 1 to year 3 are £-22,287, £24,303 and £38,774 respectively. The profit margins are calculated in Figure 2. Profit margins are derived after dividing the company respective profits by its relevant revenues and finally multiplying the derived value by 100. In other words, profit margins are shown as a percentage of revenues earned by the company. According to the calculations, the company continuously improved its performance with regards its "gross", "operating" and "net profit" margins.
The values of the company's solvency for the three consecutive years are calculated and presented in Figure 3.
Figure 3: Solvency of "Spokes Active Limited" for years 1-3
The values of the company's "net assets" from year 1 to year 3 are calculated as £175,252, £103,546 and £106,981 respectively. The values of the company's "net liabilities" from year 1 to year 3 calculated as £197,439, £101,430 and £79,127 respectively. The amounts of the company's "current assets" from year 1 to year 3 are reported as £156,548, £85,264 and £73,053 respectively. The values of the company's "inventories" from year 1 to year 3 stand at £133,060, £40,069 and £62,573 respectively. The values of the company's "current liabilities" from year 1 to year 3 are taken as £142,439, £46,430 and £79,127 respectively. The values of the company's "current ratios" from year 1 to year 3 are derived as 109.91%, 183.64% and 92.32% respectively indicating betterment in the company's performance in clearing its "short-term" obligations from year 1 to year 2, however, there's a decline from year 2 to year 3. The values of the company's "quick ratios" from year 1 to year 3 are derived as 16.49%, 97.34% and 13.24% respectively which establish that the company has performed very well in clearing its "short-term obligations" by utilizing its "most liquid assets" from year 1 to year 2. However, a decline in performance is observed from year 2 to year 3.
Efficiency of "Spokes Active Limited" for years 1-3
The values of the company's "ROCE ("Return on Capital Employed")", its "inventory days", its "payable payments period" and its "receivables collection period" are calculated as follows in Figure 4.
Figure 4: Efficiency of "Spokes Active Limited" for years 1-3
As per Figure 4, the values of the company's "earnings before interest and tax" from year 1 to year 3 are reported as £-22287, £24303 and £40859 respectively. The amounts of the company's total assets from the year 1 to year 3 are reported as £175252, £103546 and £90017 respectively. The values of the company's "current liabilities" from year 1 to year 3 are reported as £142439, £46430 and £79127 respectively. The values of the company's "return on capital employed" from year 1 to year 3 are calculated as -67.92%, 42.55% and 375.20% respectively indicating drastic improvement in the company's financial performance.
The values of the company's "inventory days" from year 1 to year 3 are calculated as 363, 105 and 53 respectively. The company's inventory days decreased continuously from year 1 to year 3 indicating that the demand for the company's products increased from year 1 to year 3 which proves beneficial for the company's financial performance.
The values of the company's "payables payment period" from year 1 to year 3 are calculated as 364, 56 and 80 respectively indicating that the company drastically improved its performance on cash management from year 1 to year 2 (Horobet et al. 2021). However, there was a slight decline in the company's performance from year 2 to year 3.
The values of the company's "receivables collection period" from year 1 to year 3 are calculated as 47, 24 and 6 respectively. This is an indication of improvement in company's receivables collection performance from year 1 to year 3 which proved to be useful for the financial health of the company.
Forecast of the company's performance for the coming year (Year 4)
As per calculations performed on the above mentioned figures, the revenue of the company for the coming year is estimated as £800,000. The values of the company's "cost of sales" and "gross profit" for the coming year are estimated as £257,573 and £542427 respectively. The "administrative expenses" of the company for the coming year would be £49,500 and its "operating profit" for year 4 is calculated as £492927 (Cont et al. 2020). There will be no "finance cost" for the company in the coming year (Hariri et al. 2019). The company would not have to pay any tax in the coming year. Hence, the company's "net profit" would be £492,927. The values of the company’s “total assets” are expected to reach £250,000 including £145,000 as "non-current assets" and £105,000 as "current assets". The value of the company's "total equities and liabilities" for the coming year is expected as £438,817. The net value of the company's "administrative expenses" is calculated as £49,500.
Summary and Limitations
Analysis of the overall financial health of "Spokes Active Limited" is presented in this report. The financial position of the company, its performance along with its "solvency factors" and its "efficiency factors" are rigorously calculated and presented in the above figures and the excel sheet. However there are certain limitations involved (Thaker and Mohamad, 2019).
This report does not consider various changes in the level of "cost price" which might influence the company's business performance.
There is no comparison of the company with its competitors involved in this report.
This report did not take "inflation" into calculations that were done in the above figures.
Conclusion
The report is presented in "financial analytics" format which took several factors to be considered before the preparation of the final submission. Based on the calculations performed in the above figures, a forecast of the company's financial performance and possible position is presented in this report. The summary portion contains some limitations that were not considered while preparing this report due to lack of financial data. Report is prepared to provide the client with appropriate data and analysis on account of shading light on its business performance for the three consecutive years. However, certain limitations are there in this report which needs urgent attention for acquiring correct financial analysis of the company's financial position.
Reference
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Hariri, R.H., Fredericks, E.M. and Bowers, K.M., 2019. Uncertainty in big data analytics: survey, opportunities, and challenges. Journal of Big Data, 6(1).
Horobet, A., Curea, S.C., Smedoiu Popoviciu, A., Botoroga, C.A., Belascu, L. and Dumitrescu, D.G., 2021. Solvency risk and corporate performance: a case study on European retailers. Journal of Risk and Financial Management, 14(11).
Levytska, S., Akimova, L., Zaiachkivska, O., Karpa, M. and Gupta, S.K., 2020. Modern analytical instruments for controlling the enterprise financial performance. Financial and credit activity problems of theory and practice, 2(33).
Levytska, S., Akimova, L., Zaiachkivska, O., Karpa, M. and Gupta, S.K., 2020. Modern analytical instruments for controlling the enterprise financial performance. Financial and credit activity problems of theory and practice, 2(33).
Thaker, H.M.T. and Mohamad, A., 2019. Prioritising disclosures of information in analyst reports using the analytic hierarchy process: evidence from Malaysia. International Journal of Business and Systems Research, 13(1).
