Abc Financial Statement Analysis in Practical

• In FY2011, ABC sales growth was 170% for FY2010 and 238% for FY2011 respectively. Simultaneously, gross profit margin decline to 8.64% during FY2011. According to ABC, the increase in revenue was contributed by larger orders by existing clients, while 20% were contributed by new clients.

• The main reason for the decline in gross profit margin were due to the sharp price increase of milk powder towards the end of 2010 and also an increase in freight forwarding cost. The increase in the price of raw material was caused by the floods in Australia, drought in New Zealand, lower buffer stocks, depreciating dollar, and the continue global economic growth are expected to prevail for much of 2011-2013. While the outlook for 2011-2013 points to a relatively tight market as exports of major dairy commodities are not expected to expand significantly, it will remain to be a stable industry. The increase in freight charges was caused by an increase in oil prices.

• Other income was higher at S$169K for FY2011 (FY2010: S$30K). The huge increase was contributed largely by the gain in FX of S$168k. FX gain for FY2010 was only S$150.

• Finance costs shot up to S$493k for FY2011 (FY2010 was only S$30k). ABC needed banking finance to fund its working capital requirement from its sales growth. Other operating expenses shot up to S$1.2m for FY2011 (FY2010 was S$340k). ABC explained that an increase in other operating expenses include the utilities bill for their four storey factory, workers’ wages, machine maintenance, etc.

• Total asset went up from S$4.7m for FY2010 to S$15m for FY2011. On top of additional property acquisitions, the 221% growth (+SGD10m) in asset base as at 31Mar11 was fuelled by the increase in Trade Debtors and Inventory. Trade debtors grow in tandem with the revenue growth while inventory shot up by 597%, According to ABC; milk productions by Cow are seasonal, usually between September to January for New Zealand and