The report on SLA Ltd Essay Example | Topics and Well Written Essays - 2500 words

The report on SLA Ltd - Essay Example The comparison would help in assessing the performance of the company within the two periods and would help in pin-pointing the areas which need proper attention from SBL’s management. Following the analysis of SBL’s financial performance and after addressing the problems face by SBL, a detailed plan of action would be recommended along with a formal conclusion that would augment the entire appraisal of the company’s performance The positives for SBL An independent review carried out by members of our company (Drake Management Consultants) reflected that SBL’s financial problems have improved in the recent ending year as compared to the prior year, with respect to profitability. The company improved on its profitability and this was assessed by using the profitability ratios. The main aim of profitability ratios is to analyse the efficiency of a company’s operations and the policies that the company has abided by in order to achieve the recent finan cial performance displayed within the financial statements. As per the profitability ratios, the performance of SBL has been exquisite. The profitability ratios clearly suggest that the company has improved their profit figure as compared to the year preceding the recently ended year. ... SBL has also restricted and brought down their operating expenses with their revenue increasing. The operating expenses as a percentage of sales have been 31.5% (Year before last) and 27.6% (Last year) (Tyran, 1993). SBL’s return on its investment i.e. the profit that it has been able to generate from its assets has been seeing improving results when comparing the two years. SBL’s return on equity has also improved by more than double to what it was in the year before last. Now this is something that can be used to persuade investors towards investing money within the company. The profitability improvements should also be considered something fruitful for the company’s current owners and its employees as a sign of growth and as an indication of growth for the company. The other positive aspect for SBL is it improved Interest Cover ratio. The company has improved on its ability to pay off its interest and that too can be attributed to the improved profits that the company has been able to generate in the recent years (Financial Management, 2000). Problems faced by SBL After appraising the positives for SBL, a general evaluation of the problems faced by the company was carried out. The company has been found to be lagging behind when assessing its liquidity ratios in the two prior years. This deterioration is alarming for the company since it can lead the company towards bankruptcy. Besides the liquidity issue, the financial leverage for SBL is yet another issue which is rather agonizing for the company. As per the financial leverage ratios, SBL has gotten itself a heavy load of debt finance in order to run the