Financial Ratios and Analysis

Question: Discuss about the Financial Ratios and Analysis. Answer: Introduction: Diva Designs is fashionable cloths brand for the women, and making more profit from their business and developing a better accounting system, a new accountant is appointed along with a new accounting system of Saasu is implemented before the month of December. Now in this report all the analysis of accounts in Diva Designs is evaluated along with recommendations (Foster, 2008). Findings: Joining as an accountant in Diva Designs, in order to make the accounting system for better functioning Saasu system is implements for performing the all process related to accounting for the organization. According to the records of the month of December 2016, this is the first working month after implementing the new accounting system, the payable accounts by the company is an amount of $ 34,210 and the accounts receivable by the company is $ 14,663. Now for the profit and loss summary of Diva Designs in the month of December 2016, total income of the month is an amount of $ 40,681.30 to be exact, and the cost of sales of the products throughout the month is $ 28,338, along with the total expenses of the whole month is $ 11,150 (Financial Analysis Hub, 2015). Analysis: Net income is the amount after subtracting cost of goods sold (COGS), expenses and taxes from sales amount. Now for the analysis of the accounts of the whole month, after finding the total income and sales cost of the products, the gross profit is $ 12,343.30, and after deducting the expenses of the month from this amount, the net profit of December 2016 is an amount of $ 1,193.30. Therefore, according to the ratio analysis, Net Profit Margin is defined as the calculated percentage, which is left after subtracting all the expenses from the amount of sales. Gross profit margin reflects the financial health of the company. It is the amount of money, which is left after the deductions of cost of goods sold (COGS). The gross profit margin of December is 0.30, along with the net profit margin, which stand 0.03 at the end of the month. According to the analysis it can be found that the net income and the net profit margin, both of them are calculated as the positive number, therefore it ca n be said that Diva Designs is serving to their customers and getting profit by their business (Axel, 2013). Particulars Gross Profit Wedding Gown 58.44% Midis 30.34% Pencil Dresses 19.83% Tunic Dresses 73.50% Table 1 Splash Table Source: Self-Developed According to the splash table, Tunic Dresses are the most profitable items in the month of December 2016 as per the sales in the outlets of Diva Designs. Recommendations: After performing all the task of analysis on doing business in the month of December, the knowledge regarding profitability while doing the business can be acquired. Now, as being the newly appointed accountant of Diva Designs, the recommendation has to be made after the analysis. Now, five more than important recommendations are hereby followed one after another in order to increase the profitability of the company (Foster, 2008). Management authorities of any retail business nowadays are not just setting the prices of their products according to the calculation of manufacturing cost and earning revenues from them, which is known as Manufacturer Suggested Retail Price (MSRP). However, they more focused on satisfying a customer first in order to make business relationships with them by transforming as a regular customer. Therefore, the strategies are set up pricing policy of the products are must affordable to the customers, which can make an increment in sales as well. It means the pricing policy must be re-evaluated by giving values to their customers. For examples, the marketers can apply premium rates on selling costs for those items, which are there for one time use like costumes for grooms as gowns for wedding. In the other hand, the authority must apply the discount on the products according to their sales count, otherwise; it can be a cause of boomerang (Alex and Patrick, 2015). One of the most tested method of improve the profitability is continuous evaluation of the total cost of the product individually until it will be handed over to the customer. The retailer must make a reduction as possible without compromising with the quality of the product to maintain the brand image of the organization. When it comes to staff turnover, the authority must recruit staffs as few as possible considering the needs of the company to reduce the staff payment costs. Apart from these, with the addition of consignments the profit of Diva Designs can be improved as having the traditional vendor, they will do sourcing of the items in just a single way to the desired location. However, adding the options for consignment, sending clothes to the outlets from the production firm is much cost effective in nature for the retailer (Courtney and John, 2014). Attracting customers with new deals as occasional offers can increase the sell for Diva Designs, which can increase the profitability. In order to portray a good brand image in the customer customers mind the authority must focus on the issue of on time delivery of the ordered products. Along with this, reducing the issues regarding payments functions while ordering of buying particular products is must maintain the good will of the company as well. Therefore, all these actions will help the fashionable women cloth retailer named Diva Designs to become the customers first choice brand, and making a positive effect, application of these actions while doing the business will make an improvement in profitability of Diva Designs (Courtney and John, 2014). All the above processes, which are described as the ways for the improvement of profitability in Diva Designs, these will help in decision-making process of the company as well. From the above ways, the process of applying discounts of certain products get much easier along with staff recruiting process for the organization gain more profit (Fabozzi and Drake, 2012). Conclusion: In order to conclude the whole report, it can be said that, as per the analysis, net income and the net profit margin, both of them are calculated as the positive number, therefore it can be said that Diva Designs is serving to their customers and getting profit by their business. Even though, some areas can be more improved as well, for that the recommendations are provided in order to improve the profitability of Diva Designs in future (Fabozzi and Drake, 2012). The Account system has different types of account both for the customers along with for the existing employees. The account is of Open Account, Check Transition, Deposit Cash, Withdraw cash. There are also broker, Stock exchange centre along with third party those who are directly involved in the system. References Alex, S., Patrick, K. (2015). An Introduction to Financial Statement Analysis. Kindle Edition accessed January 8, 2017 from Amazon.com Axel, T. (2013). Balance Sheet Basics: From Confusion to Comfort in Under 30 Pages. Kindle Edition accessed January 8, 2017 from Amazon.com Courtney, Q., John, G. (2014). Financial Ratios and Analysis: Including the Accounting Illustrated Glossary (Accounting Play). Kindle Edition accessed January 8, 2017 from Amazon.com Fabozzi, F., and Drake, P. (2012). Analysis of Financial Statements. San Francisco: Wiley. Foster, G. (2008). Financial Statement Analysis. London: Pearson Education. Financial Analysis Hub. (2015). Top Financial Analysis Ratios: A useful reference guide of over 60 financial ratios you need to know! Kindle Edition accessed January 8, 2017 from Amazon.com