Business

To : Board Directors
From : Senior Manager
Date : November 2nd 2012

This is the financial information of the last 3 years of “The House Textile” which provides products for attending national market in UK.

Fixed in process asset represents at the end of 2011, 69.96% of the total assets of the firm, invested in the construction of a building that will be used for commercialoperations and expand the market, with long term results.
This process fixed asset has undergone changes in the 2009-2010 period increased 151%, and for the next period on the increase with 65%,it means that the work is having progress.

Inventories have a percentage of 4.84% within the balance sheet, according to the requirements of the firm is harmful because shortages could occur.

The bankaccount has a percentage of 2.63% although it seems small, financially it is a representative figure within the same. This bank account had significant changes during the period 2009-2010, due to a loan acquired by the firm. It has increased the asset process, i.e., in construction, it is in the passive current, payable in the short term and for the period 2010-2011.

Loans payable equals the25.66% of the total liabilities more heritage, this indicates that a quarter of the total debt must be paid in the short term,
These loans used for the construction.

Accounts receivable in the period until 2010 decreased 57% which was good, because customers were paying, but the following year increased by 38%, this indicates that the firm has, if it is paid on time, right on the available moneyin the short term.

Suppliers within the liability equals the 5.32% which means a considerable margin of short-term debt, this can affect the supply of inventory.
Suppliers in 2011 decreased in 33%, which is positive for the firm, because is fulfilling its obligations, which guarantees further loans.

Inventories in both periods suffered a decrease of 50%, in 2011 which shows salesefficiency.

The status of the Firm indicates that the cost for purchasing products represents 41% of its total sales, which means that 59% of them represent the utility gross; these margins are acceptable since if lowering costs can affect the quality of the goods.

It is necessary to mention that the percentage of utility has grown in the past three years from 22% in 2009 to 33% in 2011 with respectto total sales, this is due to the fact that costs also underwent a change, for the case a decrease of 57% to 41% in 2011, this is good if the quality of the product is maintained.

Results of this analysis

Sales in the period 2009-2010 suffered a decrease of 33.54%, nothing beneficial for the company, but in the following have had a slight recovery with an increase of 10.15%.
Costs haveincreased both in sales and administration to the period ending in 2011 of 5.26% and 14.78% respectively, this is due to various increases in salaries of workers who encouraged productivity.

Earnings in line with sales in the 2009-2010 period fell in a 28.23%, while in 2010 - 2011 reflected a considerable increase of 55.40% what shows good performance by the firm.

Once identified the risks towhich the firm is exposed, are designed strategies that allow an adequate management to the company.

Risk: Critical liquidity levels
Strategic objective: Achieve the establishment of acceptable levels of liquidity.
Specific strategy: Establish measures that allow the proper management of accounts related to liquidity.
Action plan: requires joint responsibility of financial management andGeneral: define a minimum level in Bank, is recommended to keep one third of the annual operating expenses, they must also plan the amount of money that allows the company to meet scheduled payments as well as providing a margin of safety to make payments not provided for, or, scheduled payments when the cash inflows are available.
Ensure an optimum level of inventory, proposed the average monthly...