LQ—HND商务会计.doc

BackgroundSSP plc is a company operating food manufacturing. Mainly engaged in the food processing, provide all of the major supermarket chains meat and first-rate process. In the past few years the company has been difficult, because of the mad cow disease and hand, foot and mouth disease, make a reduce meat demand the product. Bad performance stop in 2004 and in in part on the market from the rebound turnover by nearly 15% increase. It is expected that this rebound momentum market will gather in the coming year, the SSP plc is planning to go to greater pace, open a new processing plant in Glasgow.According to the chief executive memorandum of the 30 days, this is me to 2003 and 2004 SSP plc financial condition analysis report.OutlineThe main body of the report will evaluate five parts:Part 1- Analyze the users of financial information and the purpose of using.Part 2- State of financial source and categorize with their characteristics.Part 3-Explain the cash flow statement of SSP plc. Analyze the recent financial performance and position of the SSP plc.(Including my recommendations about how to improvement of business performance)FindingsSection 1. Users of financial accounts.Users of financial statements is a organization or group USES information evaluation and decision making. Financial information users can be divided into two categories: internal and external customers.Now, I will use a watch to you the purpose and use their users of information sources reports.Section 2. Source of financesTo run a business, organizations require finance for different proposes and for varying lengths of time. In finance, capital sources of different divided into two broad categories: equity capital and loan money. Equity capital is by the owner and financial not interested to pay. Loan capital is to point to a borrowed money from sources outside of the business. The interests of the loan capital must pay. Financial aspects of the source can make clear in the short, medium and long term. Refers to borrow a short-term financial no more than one year. The middle is a fund, borrow a 2 to 10 years. Long term is a fund, borrow a period of more than 10 years.In the source of case study, the SSP plc financial condition: trade creditors, tax, bank overdraft, corporate bonds, the common equity and retained profits from last year period of account.Short-term sources:1. Trade creditors: Trade creditors are produced when the purchase of raw materials or stock is delaying to pay, thus, there is more cash which would be used for other uses. There is also an interest free way of raising finance. However, the credit could lead to poor relations with suppliers and the customers may forfeit discounts.The credit is 544,000 in 2003 and it decreased to 405,000 in 2004. The percentage of decrease is 25.56%. The decrease of credit infers that SSP plc has a good financial situation that it has a strong ability to pay credits back to suppliers. This could improve the relationship with suppliers.2. Bank overdraft:Bank account holders can prearrange with the bank to draw cheques to a greater value than the actual balance in the account. Interest should be paid by customers and bank charges will apply where an overdraft limit has been exceeded. Bank overdraft is flexible and cheap. It has a low cost. Some small bank overdraft even has a free of charge.SSP plc had no overdraft but the number increased to 86,000 in 2004. The increase shows that the company borrowed money from bank for its expansion in Glasgow. Long-term sources:1. Debentures:Debentures are loans make to companies that carry a fixed rate of interest. The companys fixed assets normally secure debentures. Debentures have a fixed time period or an open time period. The shareholders are not debenture holders. A debenture interest is paid as an expense not an appropriation of profit. SSP plc has a fixed debenture (1,560,000) in the year of 2003 and 2004. It tells us the companys fixed assets are steady.2. Ordinary shares:Ordinary shareholders receiving pay-outs from company after preference shareholders are paid. Ordinary share dividends are not fixed and subject to companys periodical performances and decisions of management in paying dividend. In SSP Company, the ordinary share capital is 1,950,000 in both 2003 and 2004. It infers that the company has a steady operation situation.3. Retained ProfitsThe retained profit is the finance brought from the last financial period. It is not fixed and may be a negative number. It presents operational situation of last period.The retained profits decreased from 505,000 to 420,000. The percentage change of decrease is 16.83%. The lower ratio shows us the company had made fewer profits in 2003 then it was in 2002.Section 3. Ratio Analysis1. Major inflows is Net cash flow operating activates of 1,345,000. Major outflow is Payments to acquire fixed assets, which takes 984,000.2. Ratio AnalysisProfitability Ratios: Gross Profit Percentage=Gross profit/Turnover x 100%2003: GPP=7,000,000/11,674,000 x 100%=59.96%2004: GPP=8,037,000/13,382,000 x 100%=60.06%Trend: IncreaseAnalysis: the positive trend, can increase the surface inventory control the quality of meat products, or procurement policy has improved. Managers should keep good momentum, continue to develop it, such as improving marketing strategy, and create better pricing strategy, inventory control or improved. Net Profit Percentage=Net Profit before Taxation/ Turnover x 100%2003: NPP=1,182,000/11,674,000 x 100%=10.13%2004: NPP=901,000/13,382,000 x 100%=6.73%Trend: DecreaseAnalysis: we know that although total profit increase, high operating costs much more is in 2004, it leads to reduce net profit. So the manager should think about how to reduce the operation cost, help our company make more profit.Liquidity Ratios: Current Ratio=Total Current Assets/Total Current Liabilities2003: CR=1,195,000/767,000=1.562004: CR=1,248,000/701,000=1.78Trend: IncreaseAnalysis: generally speaking a healthy flow rate is at least 2:1. 1.56 and 1.78 show the company is a little more than trade, and in the meet its short-term debt difficulties. The main reason for the increase is increase total current assets and flow down their total debt. I suggest that the company can make more profit for the short-term debt. The Acid Test Ratio=Liquid Assets/Current Liabilities2003: (1,195,000-608,000)/767,000=0.772004: (1,248,000-796,000)/701,000=0.64Trend: DecreaseAnalysis: reduce is a bad sign. This ratio should be 1:1. But than in two, in 2003 and 2004 for less than one. Unfortunately, this ratio is still falling. SSP plc liquidity problems to meet current assets to reduce. Company manager should pay attention to this than the development of and organization.Efficiency Ratios: Fixed Asset Turnover=Turnover/Fixed Assets2003: 11,674,000/4,017,000=2.91 times2004: 13,382,000/4,318,000=3.10 timesTrend: IncreaseAnalysis: Where this ratio gas increase, this is a good sign. It indicates that the existing fixed assets are generating more sales and maybe investment in new fixed assets gas could be been paid off. Managers of SSP plc should develop and focus on it. Debtors Collection Period=Debtors/Turnover x 3652003: 306,000/11,674,000 x 365=9.57 days2004: 452,000/13,382,000 x 365=12.33 daysTrend: IncreaseAnalysis: It is a bad sign that there is an increase in DCP. It indicates that SSPs may have a poor credit control of poor invoicing system. The bad debts may also increase. The leaders of SSP should check their invoicing and reminder system to keep the ratio a proper range.Investment Ratios: Interest Cover=Profit Before Interest & Tax/Interest Charges 2003: 1,416,000/234,000=6.052004: 1,135,000/234,000=4.85Trend: DecreaseAnalysis: the ratio shows that the company can cover the interest expense. The decrease is bad, because the company is not able to meet its interest. However, the proportion is in a reasonable range. Leaders should try to increase a companys profits to keep this than a high level. Debt Ratio=Total Debts/Total Assets x 100%2003: (767,000+1,560,000)/(4,017,000+1,195,000) x 100%=44.65%2004: (701,000+1,560,000)/(4,318,000+1,248,000) x 100%=40.62%Trend: DecreaseAnalysis: this is a good sign that the increase of the proportion. However, an appropriate proportion should keep around 50%. It shows that, the SSP less responsibility or keep assets. Banners/sign should be to manager.3. Recommendation After reading and analyzing three accounts from SSP Company, I found some problems with it and now I will present my suggestions about the future management in these two parts. Operational recommendationThe ratio of net percentage shows us, the SSP programmable controller (PLC) in the high spending the operation cost. It also shows that the company has a low cost control. So, I suggest, the SSP should try to reduce the cost of sales and operation costs, such as the new management system and use the contractor found distribution channels but to find their own.Financial adviceFor the source of finance, SS