Financial Report for Briscoe Group and Michael Hill
This report is to give financial analysis of two New Zealand companies: Briscoe Group Limited (BG) and Michael Hill International Limited (MH) for the period between 2003 and 2007. The analysis is divided into six broad categories: Liquidity Analysis, Debt Management, Asset Management, Profitability Analysis, Return to Investment, and Recommendations.
1. Liquidity analysis
The liquidity ratios are used to test the firm’s ability to pay debts immediately. For MH, the current, quick, and cash flow liquidity ratios fluctuated from in the last 5 years. They are gradually declining due to declining cash flow from operation and increased borrowings. However, the quick ratio showed a dive in 2006 and 2007, and vertical analysis shows that it is caused by decreased cash on hand in 2006 and increased inventories in 2007. Those liquidity ratios are comparatively stable for BG though they fluctuated slightly and deteriorated in 2007. This can be explained by increased liabilities in 2007 because of business expanding. Though MH shows a high current ratio than BG, BG managed to generate better cash flow to milk the business. In other words, MH needs to improve its inventory management as inventories comprise a large portion of the company’s current assets.
BG shows a better average collection period ratio than MH. Though MH’s performance is improving in terms of average collection receivables, it is not as stable as BG. MH’s low account payable days is an advantage to get prompt payment discount or negotiate better trade terms, but it is increase in 2006 and 2007.
2. Debt management
The very low level of debts to assets and equity ratios show that BG managed very good in retain ...