Financial Analysis Of Associated British Engineering And Its Competitors

Financial Accounting and Reporting

Financial accounting is the field of accounting which keeps a track over financial transaction of a company. Financial accounting makes it sure that every financial transaction is recorded, summarized and presented by the administration of the company in financial report to maintain the record of entire financial transaction.

Financial analysis assists the company to analyze and evaluate all the financial reports to make better strategic financial decision. Various financial methods are available in the financial accounting to analyze the performance of an organization in the industry to formulate a better conclusion about the position of the company and the changes in the organization from last few years. Financial analysis method also assists the financial analyst, chief financial manager and the investors to evaluate the financial statement in a better way (Ward, 2012).

Ratio analysis is one of the financial techniques which are conducted by most of the companies and financial analyst to analyze and evaluate the position of the company. This financial investigation is used to analyze and measure the various aspect of organization’s financial and operating performance. For instance, Liquidity position, efficiency position, profitability position and solvency position etc. Ratio analysis is measuring the financial health and performance of an organization through evaluating the historical and current data. 

This report has been organized to analyze the performance of Associated British engineering. The economic data of the company has been analyzed to recognize the performance and the position of the business. For analyzing the performance of the company in a better way, a study has been executed over the financial reports and the statement of the corporation and its competitive companies so that, the market position and market performance of the corporation could also be investigated. Though, this report explains that it becomes important for the organization, management, shareholders and other stakeholders of an organization to evaluate the financial performance of the organization so that it becomes simple for the analyst and investors to make a better decision.

Further, this analysis has been done in this report to analyze and evaluate the position of the company. This study is mostly used to analyze and measure the various aspect of organization’s financial and operating performance the financial analysis also makes it easier for the companies to analyze their performance in the industry and make little changes into its strategies to improve the financial performance of the corporation and enhance the competitive advantages of the company. Further, it also helps the corporation to analyze the performance of other competitors in the market and analyze that how the company could be leader in the market.

Financial Analysis Methods

Associated British engineering has been used to evaluate for this report. This company has been based in United Kingdom. This company has been listed in London stock exchange. This company is operating its business in industrial and engineering sector. Through various subsidiary companies, it is engaged in supplying of diesel engines, spare parts for diesel engineer, manufacturing the diesel engines etc. The segment of the company includes British polar engines limited, Associated British engineers plc, Akoris trading limited etc. the subsidiary companies and the Associated British engineering has operating the business in a great manner. Various positive changes have taken place into the performance of the company.

The current revenue of the company is 1.19 million (GBP). Currently, around 26000 people have been employed by the company to accomplish the project and the work of the company. The Headquarter of the comapny is in UK. The growth has been enjoyed by the company in last 5 years and various internal changes have also been done by the company to manage the performance. 

Flowtech plc has been used as a competitive corporation to evaluate the profit position and the point of Associated British limited. Headquarter of the business is in UK. This company has been listed in London stock exchange. This company is operating its business in manufacturing and supplying of engineering products. The main products of the company are hydraulic, pneumatic quick releases etc. The subsidiary companies and the Flowtech plc have operating the business in a great manner. Various optimistic changes have taken position into the recital of the company (FT, 2017).

Biome technologies plc has been used as a competitive company to evaluate the performance and the position of Associated British limited. This company has been based in United Kingdom (FT, 2017). This company has been listed in London stock exchange. This company is operating its business in industrial and engineering sector. Through various subsidiary companies, it is engaged manufacturing and supplying of engineering products. The segment of the company includes Bio plastics, Central cost and RF technologies. The subsidiary companies and the Biome technologies plc have operating the business in a great manner. Various optimistic changes have taken position into the recital of the company.

For this report, the main company is Associated British engineering plc and the main competitive companies are Flowtech Fluidpower plc and Biome technologies plc. In this report, firstly the introduction has been given about the main company and its competitive company. Further, the various books, journals and articles have been studied to analyze the importance of ratio analysis and its impact over the decision of the investors, financial analysts and an organization. Further, various criticism of ratio analysis and financial methods have also been studied. More, it has been found that how the ratio analysis assists an organization to make various better decisions.

Ratio Analysis

Further, in this report, the financial statement has been analyzed and it has been found that how the associated British engineering plc is performing in the market. Further, the company’s position has been analyzed and lastly, the recommendation has been given to the management of the company about the performance and the position of the company and lastly, a conclusive study has also been done about the entire study. 

According to Weston and Brigham, (2015), financial accounting is the field of accounting which keeps a track over financial transaction of a company. More, it has been added by Weaver, Weston and Weaver, (2001) that financial accounting makes it sure that every financial transaction is recorded, summarized and presented by the company’s management in financial report to maintain the record of entire financial transaction. Further Voelkl and Fritz, (2017) has added that the financial transaction and reports must be evaluated by the organization in a proper manage to enhance the routine and the position of the company.  

More, it has also been additionally said by Tsanakas and Millossovich, (2016) that financial analysis assists the corporation to analyze and evaluate all the financial reports to make better strategic financial decision. Further the financial analysis methods have also been analyzed and it has been found that various financial methods are available in the financial accounting to analyze the performance of an organization in the industry to make a superior conclusion about the company’s position. Further, it has been added by Oliver and Schoff, (2017) that financial analysis method also assists the financial analyst, chief financial manager and the investors to evaluate the financial statement in a better way.

According to the study of Palicka (2011), it has been found that ratio analysis is one of the financial methods which are used by most of the companies and financial analyst to analyze and evaluate the position of the company. Further, it has been added by Peterson and Fabozzi, (2002) that this financial analysis is used to analyze and measure the various aspect of organization’s financial and operating performance. More, the study of Phillips and Stawarski, (2016) has been analyzed and it has been found that ratio analysis study assists the decision maker to analyze the liquidity position, efficiency position, profitability position and solvency position etc. More, Radebaugh, Gray and Black, (2006) has added that ratio analysis is measuring the financial health and performance of an organization through evaluating the historical and current data.

Competitive Overview

Further, the study over ratio analysis express that the ratio analysis assists an organization to analyze and evaluate all the financial reports to make better strategic financial decision. Further, Reilly and Brown, (2011) has added that various financial methods are available in the financial accounting to analyze the performance of an organization in the industry to make a better decision about the position of the company and ratio analysis is one of the most used analysis method among them. Further, Ross et al, (2008) depicts that the financial analysis method also assists the financial analyst, chief financial manager and the investors to evaluate the financial statement in a better way.

Further, it has also been added by  Schlichting, (2013) that various financial analyst have expressed into their studies that the ratio analysis study does not offer the exact result to the investors and the management about the financial performance of the company. More, it has also been added by Ross et al (2007) that ratio analysis study is not at all appropriate to analyze and measure the performance of an organization. Seitzinger et al (2010) has depicted that financial analysis is done to evaluate the financial health of an organization but ratio analysis does not fit best in this process. Further, it has been added by Tian and Jiang, (2015) that ratio analysis takes the concern of financial data only and ignores the non financial data that is why the outcome get manipulated.

Further, it has been found that ratio analysis is the traditional methods of financial analysis and thus the importance of this method is quite lesser than the contemporary financial methods (Higgins, 2012). More, the Hillier, Grinblatt and Titman, (2011) depicts that this concept only takes the concern of financial statements of the organization and upon other financial and non financial factors of the company.

Further, Jiashu (2009) expresses that the Liquidity position, efficiency position, profitability position and solvency position are analyzed through ratio analysis but it is not possible for the financial analyst to make decision on the basis of that. Such as, liquidity ratios could be different of every company according to their financial strategies and the policies. Further, it has also been added by Horngren, (2009) that ratio analysis is quite simple to calculate and offers a brief about the financial statement of the company. Further, the ratio analysis makes it simple for all the related parties to make improved conclusion about company’s position and performance. This analysis assists the organization into managing the decisions of the organization (Kaplan and Atkinson, 2015).

Analysis of Associated British Engineering’s Financial Performance

Further, it has also been analyzed that the ratio analysis makes it tough for the investors to analyze the actual performance of the company because it only considers the financial figures of the company which has been recorded into the financial statements of the company. Further, Krantz, (2016) has explained that following are the formulas to calculate the ratio analysis of an organization:

Description	Formula
Profitability
Net margin	Net profit/revenues
Return on equity	Net profit/Equity
Liquidity
Current ratio	Current assets/current liabilities
Quick Ratio	Current assets-Inventory/current liabilities
Efficiency
Receivables collection period	Receivables/ Total sales*365
Payables collection period	Payables/ Cost of sales*365
Asset turnover ratio	Total sales/ Total assets
Solvency
Debt to Equity Ratio	Debt/ Equity
Debt to assets	Debt/ Total assets

More, according to the report and the article of Kinsky (2011), it has been evaluated that ratio analysis is one of the financial methods which are used by most of the companies and financial analyst to analyze and evaluate the position of the company. Further, it has been added by Kruth (2013) that this financial analysis is used to analyze and measure the various aspect of organization’s financial and operating performance. More, the study of Madhura (2014) has been analyzed and it has been found that ratio analysis study assists the decision maker to analyze the liquidity position, efficiency position, profitability position and solvency position etc. (Lee and Lee, 2006)

This report has been composed to analyze the performance of Associated British engineering. The financial data of the business has been analyzed to identify the performance and the position of the company. For analyzing the performance of the company in a better way, ratio analysis has been done (Lord, 2007). Though, this report explains that it becomes important for the organization, management, shareholders and other stakeholders of an organization to evaluate the financial performance of the organization so that it becomes easy for the analyst and investors to make a better decision (Lumby and Jones, 2007).

Further, the main competitive companies are Flowtech Fluidpower and Biome technologies. This report has been prepared to analyze the performance of associated British engineering in the industry as well as in the market. Further, it also assists the company to make various changes into its strategies to make better future (Moles, Parrino and Kidwekk, 2011).

Ratio analysis study of Associated British plc, Flowtech Fluidpower and Biome technologies are as follows:

Description	Formula	ASSOCIATED BRITISH ENGINEERING PLC	FLOWTECH FLUIDPOWER PLC	Biome Technologies
		2016	2016	2016
Profitability
Net margin	Net profit/revenues	-0.3471	0.0798	-0.1088
Return on equity	Net profit/Equity	-0.4128	0.0705	-0.1416
Gross Profit	Gross profit/ revenues	0.4405	0.3545	0.5104
Return on assets	Net income/ Total assets	-0.1511	0.0475	-0.1087
Investment Ratios
Price earnings ratio	Market value price per share/ earnings per share	0.0000	475.4646	-180.3113
Earnings per share ratio	Net income/ weighted average share outstanding	-0.2992	0.0996	-0.2125
Liquidity
Absolute liquid ratios	Absolute liquid assets/ current liabilities	3.9632	0.7152	2.7017
Current ratio	Current assets/current liabilities	5.5652	1.4076	3.0591
Quick Ratio	Current assets-Inventory/current liabilities	3.9632	0.7152	2.7017
Efficiency
Inventory turnover ratio	Cost of goods sold/ average inventory	0.2604	0.5816	0.7875
Current asset turnover ratio	Total sales/ total average current asset	0.1181	0.4516	0.3173
Asset turnover ratio	Total sales/ Average Total assets	0.0987	0.1582	0.2264
Debtor’s turnover ratio	Net credit sales/ Average accouting receivables	1.1680	1.1878	1.7154
Assumtion: It has been assumed that entire sales was on credit  basis.
Gearing Ratios
Gearing %	Long term liabilities / capital employed	-0.2186	-0.0639	-0.6230
Capital employed	Total assets – current liabilities	3459.0000	66373.0000	3523.0000

The above study of ratio analysis of all the three companies express about their position and performance in recent year. This expresses that various changes are there in the position of all the three companies (Moles, Parrino and Kidwekk, 2011). Firstly, profitability ratios of all the three companies have been analyzed and it has been found that the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology.

Recommendations

Profitability ratios include Net margin, gross profit, return on equity and return on assets. Net profit margin is a profitability ratio which express about the net earnings of the company in context of total revenues of the company. The ratio of net profit margin of Associated British Engineering, Flowtech Flupid plc and Biome technology is -34.71%, 7.97% and 10.87% which express that the profitability position and the performance of Flowtech Flupid plc are quite better than the performance of the Associated British Engineering and Biome technology (Morningstar, 2017).

More, return on equity is a profitability ratio which express about the total net profit in context of total revenues of the company. The ratio of return on equity margin of Associated British Engineering, Flowtech Flupid plc and Biome technology is -41.27%, 7.05% and 14.16% which express that the profitability position and the performance of Biome technology plc are quite better than the performance of the Associated British Engineering and Flowtech Flupid plc (Gapenski, 2008).

More, return on assets and gross profit ratio is a profitability ratio. The ratio of return on equity margin of Associated British Engineering, Flowtech Flupid plc and Biome technology is 44.05% and -15.10%, 35.45% and 4.74% and 51.03% and 10.87% which express that the profitability position and the performance of Flowtech Flupid plc are quite better than the performance of the Associated British Engineering and Biome technology plc.

Investment ratios include price earnings ratio and earnings per share. Price earnings ratio is an investment ration which express about the market value per share of the company in context of earnings per share of the company. The ratio of price earnings ratio of Associated British Engineering, Flowtech Flupid plc and Biome technology is -0, 475.46 and -180.311 which express that the investment position and the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology (Barlow, 2006).

More, earnings per share are an investment ratio which express about the net income in context of weighted average share outstanding of the company. The earnings per share of Associated British Engineering, Flowtech Flupid plc and Biome technology is -0.299, 0.099 and -.2125% which express that the investment position and the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology plc.

Liquidity ratios include current ratio and quick ratio. Current ratio is a liquidity ratio which express about the current position of the company in context of current liabilities of the company. The current ratio of Associated British Engineering, Flowtech Flupid plc and Biome technology is 5.56, 1.40 and 3.05 which express that the liquidity position and the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology (Fulin, 2011).

Conclusion

More, quick ratio has also been analyzed which express about the quick assets in context of current liabilities of the company. The quick ratio of Associated British Engineering, Flowtech Flupid plc and Biome technology is 3.96, 0.715 and 2.701 which express that the liquidity position and the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology plc. 

Further, efficiency ratios include inventory turnover ratio, current asset turnover ratio, asset turnover ratio and debtor’s turnover ratio. These ratios are calculated to analyze the performance and the cash and working capital management of the company in context of various variables. Through the analysis over efficiency position and the performance of company, it has been found that the Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology (Elton et al, 2009).

Lastly, gearing ratios include gearing % and capital employed ratios. These ratios are calculated to analyze the performance and the position of the company in terms of managing the capital position. Through the analysis over gearing position and the performance of company, it has been found that the Associated British Engineering is quite better than the performance of the Flowtech Flupid plc and Biome technology.

Through the study over financial statement and the ratio analysis of Associated British Engineering, Flowtech Flupid plc and Biome technology, it has been found that the performance of Flowtech Flupid plc is quite better than the performance of the Associated British Engineering and Biome technology. Flowtech Flupid plc has managed the profitability position, liquidity position, investment position, efficiency position and gearing ratios in a good manner.

The profitability ratios depict that the Flowtech Flupid plc is the only company which is making good profit in the engineering sector. The profitability position of the company is quite attractive and explains about the various positive changes into the performance of the company (Zabarankin, Pavlikov and Uryasev, 2014). Further, the investment ratios have also been analyzed over all the three companies and it has been found that the investment opportunity of Associated British Engineering and Biome technology is not at all good as it depicts about the negative figures and further, the worth of the stock of both the companies is not at all good in the market (Zimmerman and Yahya-Zadeh, 2011).

This analysis explains that both the organizations are required to make various alterations into its performance and strategic financial management to manage the good position in the market (Weston and Brigham, 2015). More, it has also been analyzed that the investment ratios of all the three companies express about the cash position and short term debt obligation position of the company. Through the evaluation, it has been found that the liquidity position of Associated British Engineering and Biome technology is not at all good as both the companies are under utilizing the resources and the working capital of both the companies are also higher. The idle liquidity ratios of the company are 1.33:1 which has been maintained by Flowtech Flupid plc only (Zimmerman and Yahya-Zadeh, 2011).

More, it has also been analyzed that the efficiency ratios of all the three companies express about the working capital management and cost management position of the company (Morningstar, 2017). Through the evalaution, it has been found that the efficiency position of Associated British Engineering and Biome technology is not at all good as both the companies are not managing the working capital in a good manner and thus the cost of the companies are also higher (Weston and Brigham, 2015).

Lastly, it has also been analyzed that the gearing ratios of all the three companies express about the capital structure and market performance of the concern. Through the analysis, it has been found that the gearing position of Associated British Engineering is quite better than both the other companies.

The above analysis and interpretation express about the bad position of associated British engineering plc. Through the above evaluation, it has been analyzed that the associated British engineering plc’s performance and the position must be altered by the management and chief financial officer of the company. They are required to look over the performance of the company and make few changes into the performance and the position of the company accordingly.

The comapny is required to reduce the level of the cost by making few changes into its strategies and the policies of the company. The level of debtor’s turnover, asset turnover and inventory turnover must be reduced by the company toe enhance the level of working capital. Further, the current assets are also required to be less than the current state to enhance the liquidity position of the company. Company must manage the optimal capital structure to reduce the risk and the cost of the company. Marketing policies are also required to be changed by the company.

Thus, through this report, the performance of Associated British engineering has been analyzed. The financial data of the company has been analyzed to identify the performance and the position of the company. According to the analysis over the performance of the company, various changes are required to be done by the company and the management of the company to enhance the level of the market position, profitability position, investment position, liquidity position, capital structure position etc. Though, this report explains that it becomes important for the organization, management, shareholders and other stakeholders of an organization to evaluate the financial performance of the organization so that it becomes easy for the investors and the analyst to make a better decision.

Further, this analysis also expresses about the better performance of Flowtech Flupid and express that the British Engineering plc is also required to make few changes into its strategies through evaluating the strategies of Flowtech Flupid. This study is mostly used to analyze and measure the various aspect of organization’s financial and operating performance the financial analysis also makes it easier for the companies to analyze their performance in the industry and make few changes into its strategies to enhance the financial performance of the company and enhance the competitive advantages of the company. Further, it also assists the company to analyze the performance of other competitors in the market and analyze that how the company could be leader in the market. 

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