Business Performance Analysis. learning objectives performance review the stages of performance review an example of a SWOT analysis Flatco plc balance.

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Presentation transcript:

Business Performance Analysis

learning objectives performance review the stages of performance review an example of a SWOT analysis Flatco plc balance sheet as at 31 December 2005 Flatco plc profit and loss account for the year ended 31 December 2005 reconciliation of operating profit to net cash flow from operating activities Session Summary (1)

cash flow statement reconciliation of net cash flow to movement in net debt/funds cash flow statement – gross cash flows cash flow statement – analysis of changes in net debt/funds profitability ratios profitability ratios calculation efficiency ratios Session Summary (2)

efficiency ratios calculation liquidity ratios liquidity ratios calculation investment ratios investment ratios calculation the best performance measure – cash or profit? the advantages and disadvantages of using cash flow as a measure of company performance Session Summary (3)

the advantages and disadvantages of using earnings per share (eps) as a measure of company performance Tomkins plc EBITDA for 1998 to 2002 Session Summary (4)

carry out a performance review of a business, including the use of a SWOT analysis critically evaluate the limitations of the performance review process differentiate between divisional manager performance measurement and economic performance measurement analyse business performance through the use of ratio analysis of profitability; efficiency; liquidity; investment; financial structure Learning Objectives (1)

use both profit and cash flow in the measurement of business performance critically compare the use of cash flow versus profit as the best measure in the evaluation of financial performance use earnings before interest, tax, depreciation and amortisation (EBITDA) as a close approximation of a cash flow performance measure Learning Objectives (2)

the main aims of a business performance review are to provide an understanding of the business and provide an interpretation of results care must be taken in reviewing business performance, primarily because of lack of consistency in definitions, and changes in economic conditions Performance Review (1)

An important area of business performance review is the use of ratio analysis looking at profitability efficiency liquidity investment growth financial structure Performance Review (2)

The Stages of Performance Review

An Example of a SWOT Analysis

Flatco plc Balance Sheet as at 31 December 2005

Flatco plc Profit and Loss Account for the Year Ended 31 December 2005

Reconciliation of Operating Profit to Net Cash Flow from Operating Activities

Cash Flow Statement

Reconciliation of Net Cash Flow to Movement in Net Debt

Cash Flow Statement - Gross Cash Flows

Format 1 Profit and Loss Account Cash Flow Statement – Analysis of Changes in Net Debt/Funds