This is a reflection process in order to assess the current and past financial position of the company, and the results of its operations, with the basicobjective of determining the best way possible, an estimate of the situation and future results.
Analysis of capital structure
The firm hasn’t been any aggressive in financing its debt, using verylittle proportion of equity and debt to finance its assets. What it means is that they are not taking advantage of borrowings, if they were to increase its debt, they could generate more earnings thanwithout this.
Analysis of liquidity and solvency
The conclusion we make about the liquid situation of the company is that they are in a bad situation. They do not have money for the day to day basis,nor to pay its debts to the creditors. So we come back to the financing problem, they should ask for more long and short term loans or maybe invest less money on other businesses as to retain enoughmoney to manage their firm and if needed pay its customers
Working capital. Working capital and cash position
the Working Capital is the difference between current assets less current liabilities,that is, what's left the company after paying its debts immediately, in our case, we obtain a negative value (-1308) which implies that have not enough money to operate the day. This is telling us we donot have the financial capacity to meet obligations to third parties.
This worsens the situation of liquidity of the company, having a negative working capital the company must borrow from others.Inparticular, as already mentioned, follows a strategy of low risk, when to seek financing to third parties to invest. And this leads to the capital that could be used to work in their day to dayinvestment. What could be causing the company problems with third parties.
In the horizontal analysis, the company improved by 20% from year to year, but as shown in the working capital ratio, this...