HR Management assignment on: Amgrow Financial statements and management

Part A1) The evaluation of the organization has been done on the basis of profits made throughout the organization. It is very clear from the Financial Statements of the Amgrow that the Company was in loss in year 2010 in comparison to year 2009. The reason behind the loss in year 2010 was the revenue from ordinary activities has been generated very less in comparison to year 2009. On the other side, Employees benefits expense has been paid more in year 2010 which could be the reason for the loss. It can be said that the reported year 2010 was not good for the chosen organization Amrow. It is very clear that negative figure of the profit gives bad impression of the Company among users and investors of the Company. It is advisable to the management of the Company, that they should incur fewer expenses on employee benefits in order to avert the situation of loss.

2.) It is very clear that the Return on Investment is calculated by the Company for evaluating the efficiency of the investment and for comparing the effectiveness of the numerous investments.

Return on Total Investment = Net Profit after Taxes/Total Assets

In 2009 = Net Profit after taxes = 63057

In 2010 = Net Profit after taxes = (68801)

In 2009= Total Assets = 668129

In 2010= Total Assets = 665763

Return on Total Investment of 2009 = 63057/668129

                                               = 9.43%

Return on Total Investment of 2010= (68801)/665763

                                               = 10.33%

It can be seen that Return on Investment for reporting year 2010 is negative which is not good for the Company and this happened because of the loss occurred in year 2010. The negative return on investment gives the impression among the investors that the Company is not able to utilize its total assets efficiently.

Net Profit Ratio

The two fundamental elements of net profit margin are sales and net profit. It is very clear that Net Profit Ratio is implemented for measuring the entire profitability and helpful to the proprietors (Barth, 2006).

In 2009 = Net profit = 63057

In 2010 = Net Profit = (68801)

In 2009 = Sales = 142751

In 2010 = Sales = 119290

Net Profit Ratio of 2009= 44.17%

Net Profit Ratio of 2010= 57.67%

After the evaluation of financial statements of Amgrow, it has been viewed that Net profit earned by the Company in year 2010 was negative because of less income generated from other activities and more expenses incurred on Employee benefits (Dechow, Patricia & Meulbroek, 2001). Net profit Ratio gives the overview about the profitability of the Company and the financial position of the Company. At last, it could be stated that negative net profit ratio gives the bad impression among the investors about the Company.

3.) What is the

Current Ratio

This ratio is a measure of short term solvency to see the ability of the company, to pay the current debts if they come due (Bromwich, 2004). Normally, creditors use this ratio, to measure company liquidity and see the ability that the company is able to pay short term debts or not. According to standard criteria, current ratio should be 2:1.Current Assets ÷ Current Liabilities

It is observed that, the current ratio in 2010 had decreased as compared to last year 2009 because of increase in Current Liabilities. This shows that the company would face problem in payment of short term debts because of increase in current liabilities.

Average Collection Period

In general, Average Collection Period refers to the time taken by the business to get the payments owed from its clients and customers.

Receivables Turnover = Sales Revenue/Average Account Receivable

Average Collection Period = 365*Average Account Receivable/Sales revenue

Receivable 2009 = 48089

                   2010 = 44878

Average Account Receivable = 48089+44878/2 = 70528

                                                 = 365*70528/384341

                                                 = 66.97 Days

After calculation of Average Collection Period, it has been analyzed that the Company is able to receive payments from customer and clients within 66 Days.

Average Stock Holding Period

Average Inventory Period = (inventory x 365 days) / cost of sales.

It has been examined that the average stock holding period is considered as Inventory Holding Period (Rosemary, 2010). This ratio computes the average period that the inventory is hold.

Inventory                      Cost of Sales

2009= 246 40                2009= 142751

2010= 45475                 2010=119290

Average Inventory period of 2009= Inventory *365 /cost of Sales

                                                      =24640*365/142751

                                                      = 63 Days

Average Inventory Period of 2010= Inventory *365 /cost of Sales

                                                       = 45475 *365/119290

                                                       = 139.14 Days

It can be seen that the Average Inventory Period had increased in year 2010 from 63 days to 139.14 days which is not good for the Company because it shows that the Company is not able to sell its inventory within a short period of time.

4) Long Term Financial Position

In general, there are various ratios for assessing the long term position of the organization such as Debt to Equity, Debt to Capital and Debt to Total Assets (Schipper, 2003). A company’s long-term solvency depends in part on its ability to pay its long-term bills. Long-term solvency ratios are also called financial leverage ratios and leverage ratios.  This ratio helps the company to know its ability to pay its long term liabilities or not. These ratios are also called leverage and financial leverage ratios

Debt to Equity = Liabilities/Equity

It is examined that in year 2010, the debt to equity ratio had increased from 0.153 to 0.215 which give an idea to investors that the company long term liabilities had increased.

Debt to Total Assets

It is examined that in year 2010, the debt to total assets had increased from 0.395 to 0.497 which give an idea to investors that the company long term liabilities had increased.

Debt to Total Capital

It is examined that in year 2010, the debt to total capital had increased from 0.568 to 0.813 which give an idea to investors that the company long term liabilities had increased (Spooner & Andrew, 2008).  Overall, it has been examined that Total liabilities of the Company had increased because of increase in long term liabilities.

In general, Total capital = Debt + Equity

5) Apart from ratios, it is advisable to view the Assets and Liabilities of the Company. Liabilities give the description about the creditors and third parties of the Company whereas assets give the idea about the equipments of the Company.  The clear picture of the financial system could be achieved with the help of Liquidity and Profitability Ratios.

Part 2

The admin centre needs to replace its old photocopier with a new state-of-the-art copier that will be able to handle a very large workload.

Identify the major intended goals or objectives of the project or item.

It is very clear that, the admin centre needs to replace its old photocopier with the new state of the art copier which will be able to handle a very large workload (Spooner & Andrew, 2008). It can be said that replacing of old photocopier with new state of the art copier that will  result in great quality of equipment, huge cost savings, enhanced data security and enhanced support and administrative services. This new state of the art copier will able to handle a very large workload which will increase the efficiency of the company. The objective of the new state of the art copier is to increase the efficiency of the Company by handling a very large workload.

Identify the major decisions that need to be made in its acquisition and financing

It is very clear that all businesses are required to spend their resources effectively and find out the accurate combination of financing to fund the investments and give cash to owners, if they don’t have sufficient good investments. In current time, decision making becomes increasingly important because of the uncertainty (Rosemary, 2010). It can be said that firms have limited resources which should be categorized between competing needs. The significant role of the financial theory is to offer the structure for the firms to create the decision wisely. Investment decisions contain not only those items which produce profits and revenue but those also which save money. The decisions in relation to which equipments are required to replace and decisions of working capital come under the investment decision. The management of the Company has decided to replace old photocopier with new state of the art photocopier and this kind of the decision also needs some investment to replace the old photocopier with new photocopier. Investment decision plays a major in acquisition and financing of state of the art photocopier.

Describe at least one financial decision rule that could be used in deciding whether to acquire a particular item or project option. Apply it to the investment and describe the outcome in terms of item or project selection.It is advisable to the management of the Company to apply NPV which could be used in deciding whether to purchase a particular item or not. In general, NPV is implemented in the capital budgeting for analysing the profitability of the project or investment (Schipper, 2003). The analysis of the NPV is very sensitive to the consistency of the future inflows of the cash that the project or investment shall generate. NPV method will help the management of the Company to estimate the future cash flows in relation to purchase of the new equipment new state of the art copier. The purchase of the new state art copier will minimize the workload of the workers and increase the efficiency of the Company.

Did the item or project acquired fulfil the original objectives? State why.

It can be said that the project acquired fulfil the original objectives. It is very clear that the decision taken by the management of the Company in regards to new state art copier would offer various advantages such as great quality of equipment, huge cost savings, enhanced data security and enhanced support and administrative services (Dechow, Patricia & Meulbroek, 2001). After implementation of the new state art copier, the company would be able to handle the very large workload of the Company.

Describe how the investment and/or finance process could have been managed so that the objectives were more adequately fulfilled.

It has been examined that the Industry is changing because of numerous distinct pressures throughout the previous decade, with user demand enhancing in regards to ease of quality and use (Bromwich, 2004). However, the environmental consequences from the photocopier are consistently being viewed, with the current initiation of bio-plastics and continuous efforts for improving toners. The investment could have been managed by using the photocopier in the proper manner and fulfilled the objectives adequately. The investment could have been managed by taking care of new machine properly which ultimately reduce the large workload and increase the efficiency of the Company. The manager should give responsibility to workers to take care of the machine in the proper manner and safeguard the machine against any kind of damage and destruction.

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