Analysis of Financial Statements of Bogus Limited For the Year-ended Essay

Analysis of Financial Statements of Bogus Limited For the Year-ended 30 June 2004-2005 - Essay Example The firm's inventory turnover also shows net improvements in its efficiency. In terms of stability, although there is marked recovery in the leverage and liquidity ratios, Bogus Limited's debt ratios imply that the firm is still highly leveraged and may possibly encounter liquidity problems in the future as a result of its financial positioning. Given these outcomes, a potential shareholder is recommended to invest in the company and take advantage of the firm's bright earnings prospect. In light of the firm's highly-leveraged position, a potential creditor is recommended to prudently extend credit line to Bogus Limited. Prior to arriving at an investment decision, potential shareholders and creditors must initially analyse the financial position and health of a particular company. This report provides an overview of the financial standing of Bogus Limited as at year-end 30 June 2005. It intends to aid a potential shareholder in assessing the feasibility of investing in the company's stocks by reviewing the overall and per-share performance of the firm in the past two years. Moreover, this report aims to assist a potential creditor in evaluating the company's financial health by looking at the efficiency and stability of Bogus Limited as indicated by the liquidity, leverage and turnover ratios posted in the given period. Body of the Report Performance Based on the income statement of Bogus Limited for year-end 2005 and 2004, the firm's sales increased by 26% or $554.4 million, from $2,124.1 million to $2,678.5 million. This signals that the company has sustained its earnings growth from operations in the last two years. This assertion on the firm's profitability is supported by the net profit margin posted that rose to 13% as at year-end 30 June 2005 from 11% in the previous year. Although the company's cost of goods sold substantially increased resulting in lower gross profit margin, Bogus Limited is