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MAY 2014 Haramaya, Ethiopia

This document presents a research proposal to analyze the financial performance of Repi Soap and Detergent S.C. over the period of 2007-2011. The proposal outlines the background and objectives of the study, which are to evaluate the company's profitability, liquidity, and ability to meet financial obligations using financial statement analysis tools. The significance and scope of the study are to assess the company's current position, identify strengths and weaknesses, and provide information to help management and creditors with decision making.

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976 views9 pages

MAY 2014 Haramaya, Ethiopia

This document presents a research proposal to analyze the financial performance of Repi Soap and Detergent S.C. over the period of 2007-2011. The proposal outlines the background and objectives of the study, which are to evaluate the company's profitability, liquidity, and ability to meet financial obligations using financial statement analysis tools. The significance and scope of the study are to assess the company's current position, identify strengths and weaknesses, and provide information to help management and creditors with decision making.

Uploaded by

eferem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ASSESSMENT OF FINANCIAL PERFORMANCE

ANALYSIS

(A Case Study in Repi Soap and Detergent S.C)

A RESARCH PROPOSAL SUMITTED TO


ACCOUNTING DEPARTMENT

PREPARED BY: DESTA BELETE

ADVISOR: ATO KIROS

ACCOUNTING DEPARTMENT

COLLEG OF CONTINING AND DISANC

HARAMAYA UNIVERSITY

MAY 2014

HARAMAYA,
ETHIOPIA
ABSTRACT

Financial performance is the process of measuring the results of firms


operations in monetary terms. The aim of the study is to show the real
financial performance of the Repi Soap and Detergent S.C by using
different accounting tools. The researcher will be using both primary and
secondary source of data especially the later in order to reach the aim of
the study. Finally bases on the analyzes data the researcher will try to
give some conclusion and recommendation relate to the financial
performance of the company.

ABBREVIATION

S.C = Shore Company

COGS=Cost of goods sold

NS=Net Sale

EBIT = Earnings before Interest and taxes

NFA=Net Fixed Asset


CHAPTER ONE

Introduction
1.1 Background of the Study

The word performance is derived from the word ‘parfourmen’ , which


means ‘to do’ to carry out ‘or’ to render. It refers the act of performing,
execution, accomplishment, fulfilment etc. In broader sense,
performance refers to the accomplishment of a given task measured
against preset standards of accuracy, completeness, cost and speed. In
other words, it refers to the degree to which an achievement is being or
has been accomplished performance is used to indicate firm’s success,
conditions and compliance. (Shodhganag inflibnet. ac).

Financial performance refers to the act of performing financial activity. In


broader sense, financial performance refers to the degree to which
financial objectives being or has been accomplished.

It is the process of measuring the results of a firm’s policies and


operations in monitory terms. It is used to measure firm’s overall
financial health over a given period of time can also be used to compare
similar firms across the same industry or to compare industries or
sectors in aggregation. (Shodhganga inflibnet ac).
The analysis of financial statements is a process of evaluating the
relationship between component parts of financial statements to obtain a
better understanding of the firm’s position and performance.
(Shodhganga inflibnet ac).

The financial performance analysis identifies the financial strengths and


weaknesses of the firm by properly establishing relationships between
the items of the balance sheet and the income statement. In short
financial performance analysis is the process of selection, relation and
evaluation. (Shodhganga –inflibnet. ac)

Financia analysts often assess firm’s production and productivity


performance, profitability performance, liquidity performance working
capital performance and fixed assets performance.

Generally, financial statements capture and report on four key business


activities planning, financing, investing, and operating activities.
Knowing what information is to be found plus where to find it and how to
use it in financial statement is imperative to intelligently understanding,
analyzing, and interpreting financial data. Financial statement analysis
is useful as a tool in selecting investment or merger candidates, as a
forecasting tool or future financial conditions, as an evaluation tool for
managerial and other business decisions (Pamela P).

To sum up analysis of financial statements provides the essential


concepts and tools needed by security analysts who make decisions on
the basis of information found in financial statements (Pamela P).

1.2 Background of the Organization

Repi Soap and Detergent S.C is a government owned public enterprise


which had been initially established in 1975 G.C with the name of Bianil
Ethiopia S.C with initial capital of 400,000 Birr later on as of February
23,2006 the enterprise asset and capital restructuring and established
as a share company to facilitate the privatization process as part of the
countries economics transformation package. Repi soap and Detergent
S.C found in the capital city of Ethiopia located in south west of Addis
Ababa on the main road of Jimma The major input for the company are
labours, factory and office buildings and different foreign and local raw
materials etc. By using these input the company produce Rol detergent
powder, Detergent bar soap, liquid detergent of different formation for
house hold general clearing purposes and for industrial application as
bottling industries and water well drilling.

The major customers of the products are Agents, Retails and End users
that constitute 70%, 10% and 20% of the total sale respectively.

The general business objective is to fulfil the expectations of owners,


governmental agencies, employees, customers and the country at large
have from the company.

Business Vision

To be one of the best regarded detergent manufacturing company in the


nation and world wide by providing quality products and standard
services.

Business Mission

By using modern technologies, to produce standard powder, bar and


liquid detergent and hence guarantee maximum customer satisfaction,
generating income for the company and ascertain its vision.

Organizational Set up
Repi soap and detergent S.C under the supervision of Board of Director’s
organized with a general manager, vice general manager, three
departments and two services namely:-

1. Finance and admnistration department.


2. Production and technical department.
3. Commercial department.
4. Audit service.
5. Quality control service.

Business Goals

 To maximize profit through effective activities.


 To maximize owners wealth and economic welfare .
 To ensure company’s survival and to maximize owners’ long term
interests.
 To maintain sufficient working capital investment in current assets.
 To invest sufficient funds in fixed assets needed for operatio

1.3 Statement of the Problem

Financial analysis (also referred to as financial statement analysis or


accounting analysis) refers to an assessment of the visibility, stability
and profitability of a business sub –business or project. It is performed
by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. Those
reports are usually present to top management as one of their bases in
making business decisions such as continue or discontinue its main
operation or part of its business, make or purchase certain materials in
the manufacture of its product, Acquire or rent/ lease certain
machineries and equipment in the production of its goods, make
decisions regarding investing or lending capital and other decisions that
allow management to make an informed selection on various alternatives
in the conduct of its business. (en. wikipedia –org).

Thus in order to know the exact performance of the company relate to


finance the following expecting three questions is carefullywill answer:-

1) The firm able to earn income and sustain growth in both short
term and long term? (Profitability).
2) Up to what extent the firm able to pay its obligation to creditors
and other third parties in the long term? (Insolvency).
3) The firm able to maintain in positive cash flow, while satisfying
immediate obligations? (Liquidity).
1.4 Objectives of the Study
1.4.1 General Objectives

The overall objective of this study will assess the financial performance
and evaluate financial healthiness of Repi soap and Detergent S.C by
using different analytical tool

1.4.2 Specific Objectives

A careful review of the main objectives will leads to the development of


the following specific objectives.

 To evaluate the company profitability.


 To measure the short term liquidity position of the company.
 To analyze the long term liquidity position of the company.
 To find out the attractiveness of the company as investment by
examining its ability to meet its current and expected financial
obligation.

1.5 Significance of the Study


The study under the title assessment of financial performance of Repi
soap and Detergent S.C try to show the current position of the company,
identify the company current strength and weakness, gives information
for the creditors for their investment decision and help the management
to take corrective actions for the problem faces relating to the
profitability, the solvency, the liquidity and the stability. Ingenral i am
quiently shure that the manager of the company will find it useful in
overcoming the problem that face related to the frinancial performance of
the company. The last but not least, this study will also help for other
researchers who conduct their research on the same title.

1.6 Scope of the Study

The study mainly will focus on assessing the financial performance of


Repi soap and Detergent S.C. The report is propose mainly base on
secondary data even though the primary data will be used in some
extent. The secondary data will be collecte from the annual financial
statement of the company. Particularly income statement and balance
sheet not include statement of retained earning and statement of cash
flow for the period of (2007-2011 GC). In addition to this extra secondary
information also search from recent audit report.

1.7 Organization of the Paper

This paper will compose of five chapters. The first chapter will present
the introduction part of the study which includes background of the
study, statement of the problem, objective of the study, significance of
the study and scope of the study. The second chapter will presents
review of literatures. Then the third chapter details with methodology
such as methods of data collection and tools for analysis. Finally the last
chapter will contain summary of findings, conclusion and
recommendations.

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