A Performance Appraisal Snafu

Financial analysis for Horniman horticulture

I will continue to do the financial analysis for the past 4 yrs from 2002-2005 about Horniman horticulture.

Let’s look at income statement or called Profit and loss statement first, from 2002 to 2005 Horniman Horticulture’s revenue raised from 788.5 thousand to 1048.8 thousand around 30%. Though SG&A expense also increased 103.2 thousand, the a stable change on depreciation and double increase on operating profit still make the net profit raised 28.2 thousand. Horniman Horticulture get a really good start at the first three years’ operation.

Then it’s the balance sheet part, we can clearly know Horniman Horticulture financial position with regard to assets and liabilities/equity for the past 4 years from 2002-2005, the total asset increase 14.5% about 149.5 thousand. The current asset also rose from 699.9 to 833.6 thousand; but we still can see the problem on cash balance recent decline to below 10,000 which cash level under 8% of annual revenue. If they still want to get trade discounts from supplier with the earlier payment, they have to borrow money from the bank, and took the risk of interest rate increasing. with the business developing they need hiring more employees and the worker's wages' level will also rising, In order to avoid these problems, let’s look close to the balance sheet, we can find out the account receivable and inventory increase rapidly, it means they might meet Triangular debt and excess inventory problem, Horniman Horticulture business was facing a really tough time.

After balance sheet analysis, let’s move to the ratio analysis to figure out what’s going on for Horniman Horticulture recent years.

First of all, let’s look at receivable days of Horniman Horticulture. Receivables days or called average collection period is an indication of how quickly the firm collects its accounts receivables. This case’ receivable days were increasing year by year from 41.9 days to 50.9, they...