Financial Performance Of BGC Ltd Amidst COVID-19 Pandemic - Ratio Analysis

1. Financial Performance OfBGC Ltd Amidst COVID-19 Pandemic - RatioAnalysis RatioAnalysis Due to the rapid evolving threat around the COVID-19 virus, which is commonly termed as coronavirus, has impacted the business and Investors Community Globally (www.ey.com, 2022). This report gives brief understanding of the problem BGC ltd is facing that generally provide cleaning services to retail and office sectors. BGC ltd was having a tremendous growth in the last five years but due to the emergence of covid 19, the growth of the company began to falter from the year 2020. Thus, in order to understand the financial performance of the business, ratio analysis has been conducted. This would enable the board of directors to highlight any areas of opportunities or threats. The analysis of cash budgeting would help the company to understand whether any flaws exist in their budgeting method. This paper also gives recommendation about the financial plan suitable for the business which involve shutting down the retail services or opting for services in domestic market. For Finance Assignment HelpVisit: Myassignmenthelp.com PartA The term ratio generally involves relationship between certain figures (Koen & Oberholster 1999). While doing Ratio analysis evaluation of data from current and historical financial statements are done to understand organization’s financial performance in the overall industry (Analysis, 2022). Financial ratios are used to make evaluation of business and managerial success, ability to pay its short-term debt as well as any statutory regulation of entity’s performance (Barnes1987) Profitability ratios are financial metrics used to determine ability of the organization to earn profit (Bragg and Bragg, 2022). The result showed that during 2021 the gross profit margin has reduced to half the percentage of gross profit earned during the year 2020. The gross profit margin ratio during 2021 is 3.94% however in the year 2020 it was 6.81%. Prior to the year 2020 the Gross profit of the company was higher. Similarly, the net profit margin ratio of the company also showed a significant decline in its earningcapacity. Return on capital employed on the other hand also determines the efficiency of the company to generate profit by utilizing its capital (www.myaccountingcourse.com, 2022). The ratio showed 2.33% in 2021 however in the past year the entity has 13.80% ratio, analysing the past year ratios it shows a decliningtrend.

2. Gross ProfitMargin Figure 1 Gross ProfitMargin Net ProfitMargin Figure 2 Net ProfitMargin Liquidity ratio is another type of ratio used to determine cash availing capacity of the entity for meeting future obligation. These include current ratio that showed a declining trend this is because during 2021 the current asset of the company decreases and current liabilities increases,thishasresultedindecreaseinthecurrentratioduring2021.Thecurrentratioof

3. the entity is 0.96 during 2021 which is less than 1. This means that the organization do not have sufficient cash to meets its short-term obligation. Working capital cycle showed a negative figure in 2021. This is used to determine how much time the entity will take to convert their net current assets and current liabilities into cash (Corporate Finance Institute, 2022). ProfitabilityRatios Figure 3 CurrentRatio Figure 4 Working CapitalCycle Gearing and interest coverage ratio also play an important role in determining financial performance. The gearing ratio of the company is an indicator for market risk (Kassi et al 2019). Our analysis showed that company is getting more dependent on loans which is nota

4. good sign an entity may face financial difficulties while making repayment of loan and interest if it gets too much dependent. Interest coverage showed a tremendous decline in the ratio of2021. Figure 5 GearingRatio Interest CoverageRatio Figure 6 Interest CoverageRatio Since the profitability ratio of the company indicated that the organization is badly effected due to the emergence of covid 19. This indicate a very serious situation because day by day the earning of the company is declining thus the organization must take steps to increase the salesofthecompanybyadvancingitstechnology,theymustincreasetheirprofitby

5. increasing the price of their product because higher the sales value higher will be their earning. The current ratio showed a declining trend thus the entity must take steps to reduce the current liability of the organization as well as increase its assets by doing continuous follow up of its debtors. Since the working capital cycle is showing negative figure, this is considered as an opportunity for the organization to utilize its cash more efficiently because the payable period of creditors is more than the receivable period. On the other hand, after analysing the gearing ratio and interest coverage ratio of the entity it would be better if they take steps to reduce their loans and be more dependent on equity because this will help them to reduce their debt burden as well as help in generating moreprofit. A Cash budget can be prepared using two approach that is cash receipt and disbursement approach (DeFranco & Schmidgall 2017). This budget estimates the expected cash receipts in future as well as expenditure needed to be incurred in cash, in addition the cash balance with the organization at the end of the period (Borad,2022). After analysing the data given it is recommended to the organization to increase its receipt from customers in the cash budget this would help the organization to increase its net profit during the year however focus should be given to reduce the receivable credit period as well as technology used should be improved so that more sales can be done. Purchase of the company should be done from the suppliers who provide longer period for payment, this would increase the cash inflow of the company. Taking into consideration the wages paid in cash by the company, the organization must reduce its wages expenses instead it should be utilized to make advancement in the cleaning equipment used by the organization, this would reduce the wages payment burden as well as increase the sales of the organization. Office refurbishment expenses should be distributed in all the month equally because paying in the month of September has reduced the cash inflow of the company to a significant level. Since the company is earning loss, it is recommended not to distribute dividend instead it should be reutilized as reserves of the company. This would help to increase the capital fund of theorganization. For Cost Capital assignment Helpvisit: Myassignmenthelp.com LiquidityRatio Since covid 19 has impacted the organization very severely during the year 2020 onwards, the entity is planning develop its strategy for the success of the business in future. According tothescenariogivenameetingwasconductedwiththeboardofdirectorsinwhich.Gioone of the board of directors recommend to recruit more cleaning staff and sales person whereas Bev recommend to reduce the price as well as to eliminate the business of retail sectors and to move towards domestic market. Based on the analysis of the sales and gross profit of retail and office sector from the year 2018 to 2021 we can clearly that there exists a significant decline in the sales of retail sector of the organization in the year 2021. As a result of this the gross profit of the company also decreases to a significant extent. The predicted market data for the year 2022 showed three types of possibilities during the year. Based on the probability of occurrence of Boom, Static and recession, the cash inflow of the company during the year showed the figure as shown in the appendix below. the result indicated that theofficesectorwillgeneratecashinflowof£431000whereasretailsectorisgenerating

6. only£83000cashinflowhoweverifwelookatthedomesticmarketcashinflowitshowedonly£83000cashinflowhoweverifwelookatthedomesticmarketcashinflowitshowed £ 335000 as cashinflow. Business plananalysis Figure 7Business plananalysis Recommendation Thus, taking into consideration all the option recommended by the board of directors it will be better to eliminate the retail sector service and move towards domestic sector since the cash inflow from the domestic and office sector is more than the cash inflow of retail and office sector. Thus, the entity should shut down its retail sector and move towards domestic market, this will not only create more cash inflow but also has the benefit of using the same cleaning equipment in the domestic sector without incurring any additionalcost. Conclusion Hence, we can conclude that ratio analysis of financial information would help the organization to develop its financial performance by focusing on the threats the organization is facing. In this report we have discussed about the cash budget analysis that provide a brief understanding of cash budget as well as recommend the entity to focus on increasing receipt from customer by enhancing the technology used as well as reducing the credit period of debtors. The report also recommends to make more credit purchase as well as reduce the wages. This paper also highlights about the best business plan for the success of the business recommending the entity to move towards domestic market and shut down their retail services. Hence this report helps the user to take an appropriate decision for the success of thebusiness. Original Source; https://myassignmenthelp.com/free-samples/acc97003m-financial-analysis- appraisal-and-decision-making/investors-community-globally-file-A1D1D61.html