Finance - Shaver Shop Group Limited - Business Report Assessment Answer

Assessment Task:

•  Shaver Shop Group Limited, you are required to prepare a business report (see recommended structure detailed below) with a focus on the profitability, operating efficiency, liquidity, gearing of the company. The profitability and efficiency of the company should be analysed using the required ratios. Firms are accountable for generating profit with the assets employed. In addition, the firm must pay its debts as and when they fall due, therefore you are required to assess the liquidity and gearing of the business using the appropriate ratios. Use the data from the financial statements in the annual reports to calculate the ratios.  

• Your report should cover a 2-year period for the years ending July 2017 to 2018 and should be sufficiently broad in scope to demonstrate your understanding of findings following the analysis

Your report must cover the following: 

Company and industry background 

• Brief profile Shaver Shop GroupLimited – Its history, financial highlights, and other relevant company details and summarise the nature and current state of the industry in which it operates. This section of work will help contextualise the report in terms of key company information and the industry (and wider) environment in which the firm operates.   

• History should include: When and where it started operations, by who, major expansions and acquisitions from then to now; types of products/services it offers, significant business relationships; when listed on the stock exchange 

• Industry; includes identifying which industry it operates in, and understanding of the state of the industry and identifying major competitors.  

Manual calculation and Analysis of specific ratios. Provide 2 decimal points for your ratios 

The minimum ratios to be manually calculated for each of the 2 years are: 

• Profitability o return on shareholders’ equity o return on total assets o net profit margin 

• Efficiency o inventory turnover 

o settlement period for debtors/accounts receivable o settlement period for creditors/accounts payable o asset turnover 

• Liquidity o current ratio o cash flow from operations 

• Financial gearing o gearing ratio 

Terminology in Shaver Shop Group Limited Group’s Financial Statements 

1. a.   Profit or Loss Statement use Consolidated Statement of Comprehensive Income 

   2. Balance Sheet use Consolidated Statement of Financial Position 

   3. Accounts Receivable use Trade and other receivables 

   4. Accounts Payable use Trade and other payables  

   5. Interest Expense use Finance Costs 

   6. Cost of goods sold use Cost of goods sold 

2. Assume that 10% of sales are credit sales.  

3. Assume 100% of Inventory (stock) purchases are on credit. As the purchases figure is not available you will need to calculate it. (HINT: Use your COGS formula)  

4. To calculate the gearing ratio you should use the following formula: 

Non − current liabilities

Gearing ratio =  ∗ 100 

(Total Equity + Non − current liabilities)

Analysis and interpretation of financial performance, position, and market standing 

• Based on the financial reports and other information, prepare an analysis that covers the past two financial years ending July 2017 and 2018, concentrating on the following aspects and including consideration of segment information and position in relation to its industry: 

• Profitability 

• Efficiency

• Liquidity  

• Gearing 

NB. Analysis does not mean just restating the ratios or their formulas you need to discuss the implications. 

Assessment of other relevant information

• An assessment of other, typically non-financial, information relevant to the assessment of the company’s current state of financial affairs (for instance; global events, industry developments and issues, structural changes to the company such as changes in board composition, mergers or acquisitions, economic factors and any other relevant issues which may potentially impact on the operations of the company). 

• While your report will focus on the financial performance of Shaver Shop Limited Group consider also its environmental and social performance.  

Summary, conclusion & Executive Summary 

? Based on your analysis and findings summariseShaver Shop LimitedGroup’s current financial situation and consider its potential outlook and make any recommendations

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