Evaluation of the Financial Performance of a Chemical Company Essay

Evaluation of the Financial Performance of a chemic friendshipThe Lee Chew Cheng Wong chemical Company produces high theatrical rolespeciality chemicals, and it exports around 85% of its output to manycountries and regions. Since the establishment in the mid 1980 this family has emphasized the shareholder value. To keep this focus, a in the altogether Chief Executive Lee Shan Loke Teo has proposed a lot of newpolicies. This appellation evaluates the pecuniary rations with SunSee Chemical Company and average industry, and presents the financialeffect of the proposal that Lee Shan Loke Teo adopts. That finalsection shows the recommendation of be system and capitalexpenditure budget.Evaluate the financial performance As the profit and loss account shows, the Lee Chew Wong ChemicalCompanys net sales decreased from $5.6m to $4.2m, and the grossprofit reduce from $1.8m to $1.5m, while in 20x9 the retained profitof the company reached the peak of $0.4m during this period. Although the sale volumes decreased, the profits went up. From the financialstatement it can be found that the battle is overdue to the largeoperation expenses which eliminate the profit between 20x8 and 20x9,and the slight retained profit also results the decrease of Earning pershare. Therefore, the EPS and Retained Profit in 20x9 were higher than20x8 and 20x7. As regards the balance sheet, in 20x9 the total assetof the company increased significantly compared to 20x8 and 20x7,because the fixed assets increased apparently but it also resulted theshortage of cash in 20x9. In the liability section, as follows as theincreasing retained profit, in 20x9 shareholders equity (reserves)also climbed a lot. As far as we considered the financial ratios(Table1), from 20x7 to 20x9 the profitability ratios improveddramatically due to the less cost of sales and operating expense. Theliquidity ratios become worse, because the maturation fixed assetsresulted in the lack of liquid asset. The following p art is tone ending to compare financial performance with itsmajor rival, Sun See Chemical sedulousness.Table 1=======The Lee Chew Wong Chemical Performance Ratios 20x9 20x8 20x7 20x9Industry averagesGross profit to sales (%) 35.71 33.33 32.14 44Operating profit to sales (%) 21.43 13.33 14.46 30Return on capital ... ...1998), Costing, an Introduction, 4th strainDyson, J.R. (1997), news report for Non-accounting Students, PitmanPublishing.Elliott, B. and Elliott, J. (2002) Financial Accounting, Reporting andAnalysis, International Edition,Istvan D.F. (1970). Capital-Expenditure Decisions how they are madein large corporations. Indiana University.Jones R.L., Trentin H.G. (1971). Budgeting Key to planning andcontrol. American Management Association, Inc.Lewis, R. and Pendrill, D. (1996), go Financial Accounting, 6theditionLouderback, J.G., Maurice, L. and Hirsch, J.R. (1982), CostAccounting, Accumulation, Analysis, and Use, Wadsworth InternationalStudent Editionmotorway, R. and Neale, B. (year), Corporate Finance andInvestment-Decision and Strategies, 4th edition, FinancialTimes/Prentice Hall.Pike R.H., Wolfe M.B. (1988). Capital Budgeting for the 1990s. AReview of investment trends in larger companies. The hiredInstitute of Management Accountants.Woods, F. (1993), Business Accounting, Pitman Publishing.http//teachmefinance.com/costofcapital.htmlhttp//www.dod.mil/comptroller/icenter/ run into/abconcept.pdfhttp//www.expectationsinvesting.com/tutorial8.shtml