Financial Analysis of Gemini (Essay Sample)

Financial Condition of Gemini
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Financial Analysis of Gemini
Introduction
Financial analysis is a scientific act which refers to an evaluation of viability, stability and profit making of an organization. Financial analysis of an organization is very vital in decision making and planning making. As denoted by Salman (2012), financial analysis is vital for management in determination of shares to be given out to shareholders. Credit extension by creditors is also guaranteed after evaluation of the financial position of the stipulated organization. Due to the financial position indicated, investment decision by the management can be made easily.
Gemini Electronics is a US based manufacturer, founded in 2002. Gemini has ventured in the market ever since that period. Being the largest producer of TV in the US, its market share has increased in a huge way. From the data provided, various financial analysis can be tabulated. We shall evaluate various parameters in the year 2009. Income statement and balance sheet can enhance analysis of data and different parameters can thus be obtained as following analysis depicts.
Analysis
Liquidity
Liquidity of the Gemini Company can be obtained as follows;
Current ratio: This is the ratio current assets to current liabilities.
= 6,013,296,190/2,349,963,070 = 2.56
Net working capital ratio: This is the ratio of net working capital to net assets
= (6013, 296,190-2349, 963070)/ (9957696704-2349, 963,070) = 0.4815
Asset management
For assessment of asset, we shall evaluate total assets turnover.
Total assets turnover: this is the ratio of total sales over total assets of a company, in Gemini case, = 13664, 714,160/ 9957,696,704 = 1.372 times
Long term debt coverage
To determine long term debt coverage, we shall identify;
Long term debt ratio: this is the ratio of non-current liabilities to net assets of the company.
For Gemini company, = 3,927,663,101/9957, 696,704-2349, 963,070= 0.5163
Debt equity ratio: This is the ratio of total liability to shareholders’ equity.
In the case of Gemini Corporation,
= 9957, 696,704/3680, 070,533 = 0.58
That means 42% is funded by non-owners
Profitability
To determine profitability of the corporation, we shall determine gross margin, gross mark up and stock turnover.
Gross mark-up
Thus is the ratio of gross profit to cost of goods sold.
= 4690564584/8974149576 = 0.5227
Gross margin
This is the ratio of gross profit to total sales;
= 4,690,564,584/13,664,714,160 =0.3433
Return on investment
Thus is the ratio of net profit after tax to total assets of an organization.in Gemini case,
= 779,253,450/ 9957,696,704 = 0.00708 which is 7.8%.
The main reason for tackling these financial ratios in computing financial analysis of the company is due to the importance the ratios hold and the information the ratios provide for the company. For liquidity we calculated the current ratio to determine the capacity of the company to settle current debts and from the analysis we deduced that the company have a high current ratio depicting a powerful position in paying the current liabilities (Salman, 2012). Some of the liquidity ratios were not considered as they were not much important in the analysis of the company. Such ratios were rapid ratio, quick ratio, and were not considered. For long term asset management, we computed the long term debt ratio and from the calculation, it was clear to denote that assets in the long term have a higher potential to stay.
Profitability is essential and determination of returns is best obtained by gross mark-up, gross margin and return on investment. These ratios are important in determining position of a business useful in analyzing companies (Garcia et al., 2013). Other ratios were not providing essential information concerning profitability of the company.
Vertical analysis of income statement and balance sheet
Vertical analysis for the year 2009 for income statement will have the base as sales
itemAmount Percentage (%)
sales13,664,714,160100Cost of goods sold8,974,149,57662Gross profit4,690,564,58438Selling and distribution1,001,234,53010.89R& D785,774,3407.01administration980,340,5008.34Operating profit394,440,0514.35Interest 1,528,775,1637.41Taxes329,923,7001.79Net income779,253,4503.32
For balance sheet, having the base as the total assets and total liabilities, the vertical analysis of the year 2009 was as follows;
Item AmountPercentage (%)
Cash1,413,474,4004.54A & R1,503,560,3408.34Parts inventory1,201,345,5305.48Finished goods inventory1,805,340,52031.99Total current assets6,013,296,19051.69L,P & E net3,363,891,50841.34Intangibles580,509,0066.97Total assets9,957,696,704100A/P1,564,430,45011.23Current portion of LT debt785,532,6207Total current liabilities2,349,963,07018.23Long term debt3,927,663,10131.50Shareholders’ equity3,680,070,53350.27Total liabilities9,957,696,704100
From the tables, we can deduce the following:
The company has a gross profit of 38% which is a recommendable figure. Also, we can be able to identify that administration costs and sales and distribution are among the running costs of the corporation. This makes net income to be 3.32%
From the tabulation of vertical analysis concerning the assets, finished goods inventory had the largest share of the assets in the company, for the year 2009.
Apart from financial ratios and vertical analysis of the financial position of the Gemini Corporation, further analysis can still be made. Further details will enhance us, have information regarding growth of the company, having being given figures of the previous years.
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