Financial Statement Analysis
PART A
Scenario
Buildit New Zealand Limited is a Christchurch based building company. In the aftermath of the earthquakes, owner Tom Reid set up the company with a view to help rebuild Christchurch. Buildit New Zealand Limited specialise in low cost housing that is built off site (kitset) and can be assembled on site in as little as 2 months, allowing for quick delivery of housing in areas that need it. 3 years on and the business has grown considerably, however Tom realises that with this growth they have not paid enough attention to the financial position of the business and with the next three years looking just as strong Tom realises he needs to get a better understanding of the business.
Through friends you meet Tom, your friend mentions to Tom that you are studying accounting and may be able to assist him in reviewing Buildit New Zealand Limited's financial well being.
REQUIRED
Tom has provided you the financial statements for the last two years and the industry average financial ratios for building companies throughout New Zealand. He has asked you to analyse how well the company has performed over the last year, ended 31 March 2014, and has asked you to make recommendations for improving the company's financial performance and position.
In particular, you are to:
a) Explain to Tom two key benefits to Buildit New Zealand for undertaking financial statement analysis.
b) Complete the "Table of Financial Ratios for Buildit New Zealand Limited, for 2013 and 2014.
c) Report on the following:
- Profitability ratios, (all 6 ratios)
d) - financial stability ratios, (all 4 ratios)
- asset utilisation ratios (at least 4 ratios)
calculated in (b) above. Note any concerns you might have.
Provide at a minimum eight recommendations for improving the company's financial performance and position.
e) Identify and discuss three limitations of using financial statement analysis.
PART B
Select a company listed on the NZ Stock Exchange and print the graph of 'last share price' over time for the most recent 12 months. Your graph must have a title including the company's full name, and clearly labeled axes.
You are also to give a possible explanation for the trend you observe.
You can find the company of your choice on the web site for NZX Data, which you can access from the Unitec Library Search: Find Databases, Databases A-Z, NZX Data.
