Financial analysis of Aluminium Bahrain (ALBA) Company Essay

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Table of Content

Undertakings

A )

Analysis of the Pro forma Percentage of Gross saless Method and Judgemental Approach

After fixing the pro forma statement of both, statement of comprehensive income ( per centum of gross revenues method ) and the statement of fiscal place ( Judgemental attack ) for the twelvemonth stoping 31 December 2014, we came up with the decision that Alba Company has higher assets than both liabilities and equity hence, Alba should take into consideration that they need external funding of BD 320260.4 ( 000’s ) in order to cover up for their assets.

Notes

1. Non-Current Asset Calculations

2. Account Receivables and Prepayments Calculations

3. Retained Net incomes Calculations

4. Account Payables and Accruals Calculations

B )

We have calculated certain accounting ratios that we found of import to a company like Alba. We have calculated the profitableness, liquidness, activity and debt ratios of the company. We will analyze and compare ratios of 2013 twelvemonth terminal and the projected twelvemonth terminal of 2014 ( pro forma in Task A ) . Overall, Alba’s public presentation when it comes to comparing ratios is rather extraordinary except in certain countries in which they need to concentrate more on.

When it comes to Profitability ratios, we can see that there is a minor addition in all the ratios which is a good thing. Although 2014 profitableness ratios have increased than the old twelvemonth, Alba needs to cut down their cost of gross revenues and other disbursals in order to increase their net incomes.

On a positive note, Alba has improved their liquidness position. The company’s current ratio increased by 0.07 and their acerb trial ratio increased by 0.03. Although it is a minor alteration, the company is making good when it comes to how fast they liquidate their assets over liabilities. However, even though Alba has improved in their liquidness ratios, the company’s acerb trial ratio is lesser than 1 which means that they to a great extent rely on their stock lists. For a company like Alba, yes the speedy ratio will be low because they produce aluminum and their stock list is of import to them.

Similarly, when it comes to comparing their activity ratios, Alba is in a little downhill. The stock list turnover of the company increased by 0.37 times which means that the company is traveling off their stock lists slower and they need to cut down it. The lower the value stock list turnover, the better the position of the company will be. Nevertheless, there is no alteration in the aggregation period of Alba. The company pays of their trade receivables every 35.55 yearss in both old ages. Whereas, the payment period of the company has decreased which means that Alba have to pay their trade payables 1.06 yearss less in 2014.

Last, the company is traveling through a debt state of affairs between the 2 old ages. The debt ratio of Alba decreased significantly by 5.3 % and this is a bad mark for the company because the lower the sum of other’s people money is being used to bring forth net incomes which means that Alba are bring forthing net incomes from their ain money.

D )

Forecasted Cash FlowIR = 12 %

0 12345

165882 196175.808 228424.3006 262734.0188 291216.9785337991.0189

X0.893

175184.996X0.797×0.712×0.636×0.567

182054.167

187066.616

190301.998

191640.907

1092130.687

For this inquiry, we have used the individual sedimentation discounting tabular array In order to happen out the present values of each hard currency flow through old ages 1 to 5. The ground behind utilizing this table alternatively of the rente factor tabular array is because the hard currency flows are assorted watercourse. In add-on, we added the basal twelvemonth hard currency flow to the discounted PV’s because we do non dismiss the hard currency flow of twelvemonth 0.

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