ACCT 221 : Accounting : Analysis of the Profit and Loss Statement
(a) Using the horizontal analyses information, in your own words, write a report individually analysing the Profit and Loss, Balance Sheet and Cash Flow Statement. This is to be in your own words not a report copied from a financial advisor on the internet. Marks will be significantly deducted if it is not in your own words.
(b) Draw an overall conclusion as to whether you would invest in the company and why.
Answer:
(a).The analysis of the profit and loss statement of National Australia Bank Ltd has explained the fact that the interest income in the year 2017 with respect to 2016 has reduced along with the interest expenses. However, by looking at the net profit after tax it is seen that the overall net profit after tax in the year 2017 has increased with respect to the year 2016. The earnings per share for the company with respect to 2016 have even increased.
The balance sheet has indicated the fact that the total asset of the company has increased in 2017 with respect to last year and in the same way the liabilities have increased as well. There has been a rise in the retained earnings and similarly, the total equity has increased as well.
The cash flow statement of the firm has shown that net operating cash flows have decreased and the value of the net investing cash flow has reduced. The cash slow statement has explained that the cash at the end of the period has increased in the year 2017 in accordance to 2016 and the profit and loss statement, the balance sheet and the cash flow statement indicates that the performance of the bank has improved in 2017 in accordance to the year 2016.
(b). By assessing the overall calculations that have been attained for National Australia bank, the conclusion that has been attained has been that investment in the company is ideal and therefore investments in National Australia Bank needs to be undertaken because of the fact that company has been operating in an effective manner in the year 2017 in comparison to the previous year. The financial statements have disclosed the fact that the company has better net profit after tax and therefore the earnings per share has increased as well thereby investment in their shares would yield better results and returns in the current time period. The balance sheet has addressed that overall asset of the company is precise and well maintained. The cash flow statement has addressed that the company has sufficient amount of liquid cash in the year 2017, which explains their positive strong liquidity position and this explains that the company has a strong financial position and therefore investments in the company would be provide better dividends to the investors in the future course of time.
Reference:
Cull, R., Demirgu¨ ç?Kunt, A. and Morduch, J., 2007. Financial performance and outreach: A global analysis of leading microbanks. The Economic Journal, 117(517), pp.F107-F133.
Orlitzky, M., Schmidt, F.L. and Rynes, S.L., 2003. Corporate social and financial performance: A meta-analysis. Organization studies, 24(3), pp.403-441.
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