Business Report

LITTLE GEM PLC

Executive Summary

This report evaluates Little Gem plc’s financial statements for the fiscal years ended 20X3 and 20X4, to establish whether or not the company’s profitability, liquidity, utilization and gearing ratios have deteriorated due to the difficult trading environment that the company is facing. According to the findings, the company’s financial performance has, in fact, worsened as feared by analysts and management needs to take urgent measures to address the situation. Trend and common size analysis of the income statement and statement of financial position show marginal improvements year—n-year, but further analysis using ratios show that key financial indicators have weakened in 20X4 compared to the previous year. The report recommends Little Gem’s management takes the following measures to improve the company’s performance:
 Negotiate for better credit terms with suppliers to improve cash flow
 Seek sufficient credit lines from banks
 Improve managerial efficiency with regard to cash collection
 Negotiate cheaper prices with suppliers of raw materials or look for suppliers with fairer prices

Table of Contents
Executive Summary 2
Table of Contents 3
1. Introduction 4
2. Main Findings 5
2.1 Summary of business operations in 20X4 5
2.2 Comparative financial statements 6
3. Ratio Analysis 8
3.1 Profitability 8
3.2 Liquidity 8
3.3 Utilisation 9
3.4 Gearing 9
4. Conclusion and recommendations 10
5. References 11
ANNEX I: Ratio Analysis 12
ANNEX II: Common Size Income Statement for the Year Ended 31 August 13
ANNEX III: Common Size Statement of Financial Position as at 31st August 14
ANNEX IV: Income Statement with Trend Analysis for the Year Ended 31 August 15
ANNEX V: Statement of Financial Position with Trend Analysis as at 31st August 16

E2-8 These financial statement items are for Barfield Corporation a...