Ecofin by sirkkka

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

Contents 1. Introduction

2. Financial soundness

3. Application and sources of funds

4. Solvency ratio

5. Cash flow and profitability analysis

6. Advises to the company and stakeholders

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

1. Introduction Viajes Pacífico is a travel agency with almost four decades of experience. Here below, we have the Balance sheet and the Income Statement of the company in 2013 and 2015. So, financial soundness, application and sources of funds, solvency ratio, cash flow and profitability analysis will be analyzed so that we can get conclusions about how the company has been doing from one year to another. Finally, we will see possible advises to the company and stakeholders.

2. Financial soundness BALANCE SHEET EQUILIBRIUM Since Viajes Pacífico is a travel agency that work mainly online, they do not have NCL, that means that in order to know if the company is solid or not, their NCA have to financed with their NE. And, actually it does.

As we can see, the difference between both years is almost non-existent. Even though the margin between NCA and NE is not very big in both cases, we have to take into account that the NE money amount is stable and reliable, since it owed totally by the company, so they are solid.

2013

2015

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

DEBT RATIO

2013 QUANTITY HIGH DEBT RATIO

2013 QUALITY

2015 QUANTITY HIGH DEBT RATIO

2015 QUALITY

In terms of financial equilibrium, we could say that the company is solid, but in terms of debt ratio they are not, since they are very indebted.

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

3. Application and sources of funds APPLICATION

INCREASE NCA

411498

INCREASE CA

5023906

SOURCES LT

INCREASE NE

1221034

INCREASE CL

4214370

LT assets have to be financed with LT sources ST assets have to be financed with ST sources

IT IS PROPERLY FINANCED since their LT assets (411498€) are being financed with their LT resources (1221034€)

4. Solvency ratio As we can see, the results are quite similar. The Currency solvency ratio is quite good since it is higher than the standard ratio of the sector.

In 2015, the Working capital has increased and the Final solvency has decreased but almost insignificantly.

However, the cash ratio has increased. Which is better for the company.

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz   2013

2015

If we compare the results with the sector average numbers, we realize that the company are quite good, better than the average. Moreover, the difference between the numbers of both years is minimum. In 2015, the working capital is a little bit higher and cash ratio has also increased. However, final solvency is almost the same.

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

5. Cash flow and profitability analysis 2013

2015

In 2015 the cash flow increased, which is better for the company. In order to know more detailed information about the cash flow of the company, it would be necessary to know which is the cash cycle of the company: when do they pay and when are they paid.

2013

2015

Marta Fanega València Carla Muñoz Sales Sara Marín Muñoz

As we can see ROA (represents the capacity of assets to generate profits=profit rentability) has increased from 8,13% to 12,63% which is good for the company. It is higher than the standard of the sector. On the other hand, ROE (how well a company uses its resources to generate earning growths) has also increased from a 21,58% to 38,60%. It is higher than the standard of the sector, too. Moreover, since ROE>ROA we can say that there is a financial leverage

6. Advises to the company and stakeholders In order to see the big picture of the company, we have to analyze the commercial, economic and financial situation of the company. Commercial: In the P&L we can see that the company is working harder but they are also selling more which implies more incomes. Economic: Comparing the P&L, ROA,… we can see that from 2013 until 2015 the company has worked more but also has grown and the income has increase. In fact, the net profit for the year has increased from 887238 to 2057975, which is a lot. Moreover, the ROA has increased, which is better for the company. Financial: Even though the company has a debt ratio of approximately 75% both years, the balance sheet equilibrium is quite solid since they can finance their NCA with their NE. FINAL RESULT The company is doing quite well, they have done a good job since one year to the other. Even though they have to take into account that they are highly indebted, which could be a problem in the future.