|
Profit & Loss Accounts
|
FARHA Ltd. OMR 000’s As of Dec. 31, 2017
|
SALWA Ltd. OMR 000’s
As of Dec. 31, 2017
|
|
Turnover
|
18550
|
18300
|
|
Cost of goods sold
|
13300
|
13700
|
|
Gross profit
|
5250
|
4600
|
|
Other expenses
|
3470
|
2940
|
|
Operating profit
|
1780
|
1660
|
|
Interest payable
|
350
|
380
|
|
Profit before taxation
|
1430
|
1280
|
|
Corporation tax
|
430
|
380
|
|
Profit after tax
|
1000
|
900
|
|
Dividends
|
450
|
450
|
|
Net profit for the year
|
550
|
450
|
|
Retained profit brought forward from the previous year
|
0
|
0
|
|
Retained profit carried forward
|
550
|
450
|
Report on a financial consultant, you are requested to
advise you customer, Mr. Ibrahim, who wants to invest in one of two companies,
either FARHA Ltd or SALWA Ltd, based on the following information for the year
ending 31 December 2011
The
present report provides financial consultancy to Mr. Ibrahim for his
investment. The complete analysis of both companies provide information about
Salwa Ltd. and Farha Ltd. The analysis considers the profit and loss, gross
profit, cost of goods sold, operating profits, and profits before taxation, and
interest payable. The current ratio for Farha ltd is higher as compared to the
Salwa ltd but still the analysis of financial ratios are not reliable for
liquidity, activity, and profitability. There are other different and reliable
considerations that are more accountable for the final decision such as
revenue, cash flow, and the prices of stocks for the earning per share for each
company. The process of investment in each company is different because of
different strategies and interest rates. Besides financial considerations the
investor Mr. Ibrahim should consider the position of organization and
investment methods that are provides more benefits to the investor.
Here we write a report for Mr. Ibrahim for advising on the
situation of two companies. As Mr. Ibrahim want to invest his money in the
company, but he is confuse between these two companies. According to the
financial ratios that are given of both the companies for making his investment
decision I don’t think that Mr. Ibrahim should rely only on financial ratios.
Because the financial statement change every year according to the
profitability, activity, liquidity as well as gearing change every year. Mr.
Ibrahim should do the complete analysis of the five years financial analysis of
both FARHA Ltd. As well as SALWA Ltd companies. If the Mr. Ibrahim has proper information
then they easily decide where he should invest his money weather it is
profitable or not.
There is the following ways to consider that weather the
company is good or bad also we could invest in the company or not. Firstly we
should evaluate the company properly that company has worth for investing.
After that find out that the price of the stock makes its purchase a good
decision of investment. We should also look at the financial statement of the
company for example its revenue, earnings as well as over the past several
years’ cash flow. Also look at the P/E ratio of the company that is known as
the price of the stock divided through per share earnings. You should also
watch the news regarding the company financial situation and what is going inside
the organization.
