Running head: Anandam Manufacturing Company: Analysis Of Financial Statements 1

ANANDAM MANUFACTURING COMPANY: ANALYSIS OF

FINANCIAL STATEMENTS
 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 2
Table of Contents
Summary......................................................................................................................................3

Objectives of the Analysis of the Case........................................................................................3

Problem Statement.......................................................................................................................4

Relevant Facts..............................................................................................................................4

Ratio Analysis..............................................................................................................................5

Trend Analysis.............................................................................................................................5

Would you grant the loan? Why or Why not?.............................................................................6

Recommendations........................................................................................................................7
 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 3
Summary
In July 2015, the CEO of Anandam firm went to the bank to get more money to satisfy

the increasing wants of his fabric firm. The owner was encouraged by the financial probability of

his firm, with a well-defined increase in profits and a four times, increase in after-tax sales over

the past 3y. He believed his business was very successful in a highly challenging working

environment. The bank manager directed the loan manager to make a decision and think about

the loan request if possible. Finding a business life may require preparing a normal size

statement and use that analysis, explaining selected ratios, and writing a basic cash flow

statement. [ CITATION Vin \l 1033 ]

Objectives of the Analysis of the Case

The purpose of the examination is to analyze the financial balance and accuracy of the

anandam building firm. In line with financial examining, Anandam building firm’s financial life

evaluation is a process that suggests to make a number of advice for a well-developed and well-

controlled attribute strategy to keep way of credit growth and delivery slowdown. In addition to

the build of credit policy.

I wish to prepare a detailed financial study of the firm to ensure that it has the ability to

borrow and pay its liabilities. Also, look at their financial statements with the help of previous

data about financial study to provide enough information on how the company performs by

calculating its financial statements guess for its direction analysis. This will be the key factor for

determining whether the firm is good to be given a loan request or not.

 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 4
Problem Statement
Anandam building Firm has requested the local bank to give them an extra P50, 000,000

to fulfill the needs of the clothing firm. Extra credit from advance loan is needed to well

organized business and increased business. The biggest problem identified was whether you

should accept a loan from Anandam Manufacturing by looking at their financial statements.

Relevant Facts

Ratios Industry 2012-13 2013-14 2014-15

Liquidity Ratios        
Current Ratio 2.30 2.54 1.79 1.60
Quick Ratio 1.20 1.31 0.93 0.79
Working Capital Turnover 8.00 3.50 3.50 4.77
         
Profitability Ratio        
ROE 22% 23% 25% 22%
Return on total Assets 10% 14% 12% 9%
Return on Fixed Assets 24% 31% 45% 33%
Net Profit Ratio 18% 29% 23% 19%
Gross Profit Ratio 40% 38% 41% 40%
         
Management Efficiency Ratios        
Receivables Turnover Ratio 7.00 6.00 2.88 3.43
Total Asset Turnover Ratio 1.10 0.78 0.86 0.87
Fixed Asset Turnover Ratio 2.00 3.03 1.55 1.80
Current Asset Turnover Ratio 3.00 3.03 1.55 1.80
Receivables days 52.00 60.00 125.00 105.00
Inventory Turnover Ratio 4.85 6.25 3.20 3.56
Inventory Days 75.00 94.19 193.33 171.09
         
Leverage Ratios        
Debt To equity Ratio 35% 83% 185% 264%
Long Term Debt to Total Debt 24% 74% 42% 47%
Interest Coverage Ratio 10.00 9.67 7.08 4.53
 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 5
Using the ratios from 2012 to 2015, we can compare the average rates of the Industry and

the company, and we can see what the problems are in the company.

Ratio Analysis
The company's asset rating indicates an adverse impact. From their current rate, the first

year 2012-2013 has been good because 2.54% shows a higher liquidity compared to the average

industry but as time goes on, in 2014-2015, amount are reduced to only 1.6 % which makes them

low compared to other industries. After that, their fast rate, from 1.31% in 2012-2013, decreased

to 0.79 in 2014-2015. Their liquid balance indicates that they are not able to meet their charges

on time. The efficiency of the industry is disappointing; they need to apply the suitable policies

of their company.

Their non-profit revenue, magnificent sales time, supply time in inventory, and inventory

profits, show that they are not working as well as the CEO thought, due to a significant decline in

revenue collection, credit increase and sales days for their products is higher than 75 days

increase on customers. I see that the sale-to-equity ratio increases which means that when their

dues goes up more than the risk. And the times of interest are decreased; means that if the

interest rate is low, the company may not be able to pay its liabilities. We can also compare the

income of the Company, although it is going upward, only increasing in a very small amount

compared to the firm. Anandam firm Net Profit Ratio indicates a declining line.

Trend Analysis
Trend Analysis
  Growth Growth
2013 in 2013- 2014 in 2014 2015
14 -15
Cash 200 42% 480 60% 800
Credit 1,800 42% 4,320 60% 7,200
 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 6

Total sales 2,000 42% 4,800 60% 8,000

Cost of goods sold 1,240 44% 2,832 59% 4,800
Gross profit 760 39% 1,968 62% 3,200

General Selling
80 18% 450 45% 1,000
&Admin exp

Depreciation 100 25% 400 61% 660

Interest expenses
60 38% 158 46% 340
(on borrowings)

Profit before tax

520 54% 960 80% 1,200
(PST)

Tax (. 30% 156 54% 288 80% 360

Profit after tax

364 54% 672 80% 840
(PAT)

By analyzing the trend, it can be seen that the firm recorded the highest sales growth in

2015, As well as in 2015 trend analysis is completely different from the 2014 and 2013, which

shows a growth rate of about 80% after all the taxes are deducted from them . Growth in COGS

show good results in 2014 and also shows good effects in 2015. As the positive growth in total

sales has a direct impact on increasing costs, as analyzed by the above statement of trend

analysis.

Would you grant the loan? Why or Why not?

As the loan officer it is clear that the company’s financial position is not very good and it

would not be able to pay back the amount to the bank. So if I am the loan officer I would not

accept the loan offer of the anandam company as the bank would be in the risk that if it’s money

will be returned or not even though the company is planning a bright future. But the current

figures show that the company is not in the good condition to pay back the loan amount
 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
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Strength and Weakness Analysis of Anandam Company

Strength

 It is a good standard clothing firm

 The firm sells advanced designs of children's clothing

 The amandan company has skilled labor work force

 The amandan company has 12 years’ experience as a clothing firm

Weaknesses

 The amandan company does not have a good strong plan to improve it’s receivable

collection period or the inventory turnover period.

 The firm does not ship the products directly to the customers.

I would recommend that Anandam building firm should improve on it’s Account Receivable

in days because if it will improve its Account Receivable ratio then they would get their money

fast and they can pay its suppliers etc very fast and its stability would rise.

Recommendations
I would also like to recommend the importance assets turnover into the cash account, so that

fast The Company should also look at the Receivable collection period very carefully. Low

collection time the increased risk of bankruptcy

In addition, the company can use timely billing so that the customer can earn money quickly

and prevent any delays in collection.

 ANANDAM MANUFACTURING COMPANY: ANALYSIS OF FINANCIAL
STATEMENTS 8
The company can use a well-developed loan system portal so that how much borrowing with

the amount of dues. This will help keep the company updated and will keep their financial and

debt values very stable.

References
Last Name, F. M. (Year). Article Title. Journal Title, Pages From - To.

Last Name, F. M. (Year). Book Title. City Name: Publisher Name.

Vinay Goyal, S. k. (n.d.). ANANDAM MANUFACTURING COMPANY: ANALYSIS OF

FINANCIAL STATEMENTS. Western University London. Retrieved from

https://www.academia.edu/36209014/ANANDAM_MANUFACTURING_COMPANY_

ANALYSIS_OF_FINANCIAL_STATEMENTS