AnalyzeAs A CFO
ACFO plays a critical role in the financial management of a firm.Through his/her analysis, a CFO can be in a position to advise abusiness on ways of cost reduction or measures in which an entity canincrease its revenues (Tracy, 2012). The purpose of this paper is tooffer a CFO report based on the income statement and balance sheetprovided the analysis will focus on asset turnover and net profitmargin ratios.
AssetTurnover Ratio = Revenues divided by total assets (Sinha, 2012).
Forthe month of January, asset turnover ratio for the business was25,506.60/21,157.02 = 1.21
Alternatively,the asset turnover ratio for the month of February was31,088.05/26,621.81 = 1.17
NetProfit Margin = gross profit divided by total revenue (Brigham& Houston, 2013).
Netprofit margin for January = (3,842.98)/25,506.60
Netprofit margin for February = 2,724.29/31,088.05
Fromthe analysis, it is evident that the assets of the company areutilized efficiently to generate revenues to the business, which canbe transformed into profits. However, the assets are not fully usedto generate revenues as evidenced by a fall in the asset turnoverratio between January and February. Therefore, the management and useof the assets should be monitored in order to establish the reasonfor underutilization. Besides, from the analysis, it is evident thatthe company increased its profit generation between January andFebruary. However, the profitability of the company is very low. Inorder to increase its profits, the business needs to decrease itsspending, especially in three areas advertisement and promotion,staffing, and management. For instance, the business may turn to theuse of social media platforms in order to address the highadvertisement and promotion costs (Fleisher& Bensoussan, 2015).
Brigham,E. F., & Houston, J. F. (2013). Fundamentalsof financial management.Mason, Ohio: South-Western Centage Learning.
Fleisher,C.S. & Bensoussan, B.E. (2015). Businessand competitive analysis: Effective application of new and classicmethods.Upper Saddle River, NJ: Pearson Education.
Sinha,G. (2012). Financialstatement analysis.New York: Prentice-Hall of India.
Tracy,A. (2012). RatioAnalysis Fundamentals: How 17 Financial Ratios Can Allow You toAnalyse Any Business on the Planet.New York: Wiley & Sons.