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.
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Net trading and operating cash flows of the company are linked with the trading activity as well as credit sales.
|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
|Curernt Assets||95 000||153 000||225 000|
|Current Liabilities||64 000||57 000||70 000|
|Inventory||6 000||5 000||4 000|
|Cash||–||20 000||30 000|
|Marketable Securities||10 000||10 000||15 000|
|Credit Sales||30 000||35 000||40 000|
|Accounts Receivable||15 000||17 000||20 000|
|Goods Sold||107 000||151 000||199 000|
|Average Inventory||126 000||105 000||84 000|
|Total Debt||50 000||50 000||40 000|
|Total Asset||107 000||151 000||199 000|
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)
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)
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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|
|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.
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.
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.
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.