Armour Shield Ltd. Analysis

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Table of Contents

Introduction
Net Trading
Cash Flow Analysis
Risk Assessment
Considerations
Conclusion
Reference List

Introduction

Armour Shield Ltd is the company engaged in the sphere of complex engineered textiles to provide tailor made solutions to client requirements. This is closely associated with the inevitable cooperation with governmental structures, as ballistics-grade fabric is generally regarded as the production of strategic value. As for the financial objectives, it should be emphasized that the actual lending assessment of the company is performed on the basis of the governmental regulations of the borrowing opportunities.

Net Trading

Net trading and operating cash flows of the company are linked with the trading activity as well as credit sales.

	2007	2008	2009
Capital	100 000	100 000	100 000
Reserves – capital		30 000	65 000
– profit and loss	27 000	31 000	34 000
Partners’ funds	127 000	161 000	199 000
Intangibles	20 000	10 000
Net Capital Resources (Deficiency)	107 000	151 000	199 000

Profit and tax liability are based on the values of the effective trade system as well as properly arranged tax calculations. The liability is generally based on the bank interests as well as the taxes that are included into the overall cash flow calculations.

NPV calculations reveal that the project is quite reliable, and if directors wish to attract exterior investments, the investors should not doubt that the project is beneficial. Surely, the first period is not beneficial, and the actual financial statements clearly revealed this premise, however, further periods are quite effective financially.

Cash Flow Analysis

Financial ratios are generally regarded as the most objective way to analyze the cash flow

	2007	2008	2009
Curernt Assets	95 000	153 000	225 000
Current Liabilities	64 000	57 000	70 000
Current Ratio	1,48	2,68	3,21
Inventory	6 000	5 000	4 000
Quick Ratio	1,39	2,60	3,16
Cash	–	20 000	30 000
Marketable Securities	10 000	10 000	15 000
Cash Ratio	0,16	0,53	0,64
Credit Sales	30 000	35 000	40 000
Accounts Receivable	15 000	17 000	20 000
Receivable Turnover	2,00	2,06	2,00
Goods Sold	107 000	151 000	199 000
Average Inventory	126 000	105 000	84 000
Inventory Turnover	0,85	1,44	2,37
Total Debt	50 000	50 000	40 000
Total Asset	107 000	151 000	199 000
Debt Ratio	0,47	0,33	0,20

Profit and loss analysis is performed on the basis of realistic financial statement, and the company’s success development is closely linked with the values of the income growth and removal of the misbalance between incomes and losses. Marginal costs of the financial strategy are 14% of the overall cash flows, hence, this margin is regarded as sufficient for the analyzed financial circumstances. (Gitman, 2009)

Risk Assessment

Considering the current financial data, it should be stated that the company needs to reduce trade crediting. Regardless of the fact that these are not the essential sums, they prevent company from achieving the full-fledged income. However, the actual purpose of borrowing is closely linked with the values of insuring the financial stability of the company. The initial borrowing instance was necessary for starting the business activity, while further instances are required for effective business development. (Ross, 2005)

Profit and loss statements reveal that the project is quite viable. Actually, the production manufactured is rather specific, though, it is demanded, and the company has an opportunity to increase sales. The factor of depreciation should not be regarded as an important factor, as it is too slow in comparison with the company’s development. The working capital of the company is based on the real and reliable factors of financial performance, however, valuable overheads should be better balanced with fixed overheads. (Johnson, 1988)

	% of average unit value
Materials	25
Direct labour	25
Variable overheads – manufacturing	5
Variable overheads – administration & distribution	15
Fixed overheads – manufacturing	5
Fixed overheads – administration & distribution	15

Inflation rate in 2009 was close to 4%, however, the Pound Sterling is regarded as one of the most stable currencies, hence, inflation rate in not considered in the financial analysis part.

Operating cash flows and net present value analyses are based on the actual financial performance of the company, and it should be stated that the financial incomes of the company through the year.

Considerations

In fact, there are no alternatives, as the interest rate of all the banks is comparatively the same (McCarthy and Hatcher, 2006). However, considering the volumes of loaning, the current practice may be regarded as the optimal alternative.

Conclusion

The financial analysis of the Armour Shield Ltd is performed on the reality-based assessment of the financial situation. Regardless of the fact that the principles of financial statement are taken from the actual financial reports of the company, some values are missing. Nevertheless, the payment opportunities and capabilities of the company are quite reliable. As for the recommendations, it should be stated that the company needs to increase the trade debts and eliminate credit sales in order to increase its current financial assets.

Reference List

Gitman, L. 2009, Principals of Managerial Finance, 12th Edition, Pearson Prentice Hall, Boston.

Johnson, J. 1988 Effective Lending Management: How to Save Money and Spend it Wisely, London: Pan books.

McCarthy, P. and Hatcher, C. 2006 Negotiating Persuasively: Making the Most of Your Funds, Sydney: Allen and Unwin.

Ross, S., Westerfield, R., Jaffe, J. 2005 Corporate Finance, 7th Edition, Mc Graw Hill.