Finance Essay Example | Topics and Well Written Essays - 2250 words - 1

Finance - Essay Example In addition, the company operates its hospitality business from Fremantle, Healesville and Melbourne. The company has some subsidiaries as well such as Little Creatures Breweries Pvt. Ltd., which is a popular name in Australia. Another subsidiary assisting the group in its packaging and hospitality vertical is Fremantle Harbour Properties Pvt. Ltd., as recorded last on June 30, 2006 (Reuters, 2011). The present paper aims to assess the credibility of the company during 2009 and 2010, based on which it might be appraised to the position of a suitable borrower. Credibility of a company could be decided through an evaluation of its financial performance over the years. Financial evaluation on the other hand, could be made on the basis of the four groups of ratios namely, Liquidity, Efficiency, Activity and Profitability. In case that the company is found to fare well in terms of the above factors, it might be regarded as a suitable borrower. In addition, an assessment of the economic en vironment in which the bank is functioning also needs to be assessed for the purpose. Economic Environment Strengths The economic environment of Little World Beverages Group might be regarded as having improved from the records of financial year 2008 to that in the financial year 2009. It experienced growth in terms of total operating revenues as well as net profit ratios by 18% and 51% respectively over the years. These improvements had essentially been due to expansions in the company’s base of operations over the years. It had moved on to international frontiers as well so that the company started experiencing economies of large scale operations (Little World Beverages Limited, 2009-10). Weaknesses The company is recently found to have withdrawn much of its outstanding shares from the secondary market which has taken a toll over its financial leverage quotient. Moreover this very fact has proved to be quite taxing in its profitability aspect as well which is the reason why the company might be at the verge of losing its loyal base of investors. Financial Status As mentioned earlier, the financial evaluation of a company would be made on the basis of four groups of financial ratios each of which will be examining one particular aspect of the company’s profile. Information based on which these assessments are to be made will be available on the company annual reports. Liquidity Liquidity of a company decides the extent to which a company is capable to meet its short run obligations. In other words, how far a company is able to tackle its short run liabilities given its volume of assets is something that is conceptualized by the term short term solvency. It draws a comparison between the company liabilities and the volume of liquid assets possessed by the company. In case that the proportion of liquid assets is greater than the liabilities surmounting the company, it might be regarded as solvent over the short run (Wild, Subramanyam & Halsey, 200 6). There are three ratios to determine short term solvency of a company, namely – Current Ratio – It decides the units of current asset that a company possesses in comparison with the current liabilities of the same. Ideally, current ratio must be greater than 1 in order to establish a company’s solvent position. In case that it is rising over time as well, short term liquidity of the company might be regarded as a robust one. Quick Ratio – It implies the ratio of quick assets to current liabilitie