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Analysing Financial Information

In: Business and Management

Submitted By jshytem
Words 1592
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This 1200 words report will compare the performance of Bravo LTD for the past 2 years (2007 and 2008) by means of simple ratio analysis. This will be used to express the relationships between different performance in the company in both 2007 and 2008. The later sections of this report will give results of the various ratios, reasons for using ratio analysis, description of the ratios, findings, analysis and recommendation for Bravo LTD, limitations to the use of ratio analysis in this report and limitations to the use of ratio analyses in general.
Refer to appendix for all calculations and data.
In order to compare the performance of Bravo LTD in 2007 and 2008, ratio analyses will be used.

The reasons for using Ratio Analyses

Feldman & Libman (2007) defined ratios as a way to express a mathematical relationship between two data, this can be in form of percentages, rate or proportions, and it can be used to compare the performance of a business within a period of time. Financial ratio analysis uses ratios and relationship between various financial statements as a means of comparison in terms of operational, financial and investing performance of companies.
Gowthorpe (2005) introduced the following 5 categories of ratios. These are
• Performance ratios – This is used to measure success or failure of business performance
• Liquidity ratios – Extent at which business can cope with its liabilities
• Efficiency ratios – How efficient the assets are managed and utilised
• Investors ratios – This is used to access items of interest to investors
• Lending ratios- This is used to measure the relationship between finances through borrowings and financing through capital.

• Refer to APPENDIX 1 for the Income statements for the year ended 31 December and Balance sheet as at 31 December
• The formulas used can be found in APPENDIX 2.

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