MAGIC MBA 4 CORPORATION

FINANCIAL STATEMENT ANALYSIS

December 2019

Presented by Group 4:
Amro Hilal
Diane Moutran
Elie Abi Jaoude
Zahy Al Asmar
Table of Contents

• Introduction ……………………………………………………………………………………....3

• Objectives and Methodology………………………………………………………………...4

• Adjusted Trial Balance……………………………………………………………..…………..5

• The 3 Financial Statements: ………………………………………….……..………………6

- Income Statement………………………………………….………………..………….….7
- Retaind Earning………………………………………..…….………………..…………...8
- Balance Sheet…………………………………………………………………..………….…9

• Ratio and Ratio Analysis …………………………………………………….………..…….10

- Net Profit Margin………………………………………………….……………….……….11
- Return on Asset…………………………………………………………..………………...12
- Return on Equity…………………………………………………………………….….
…..13
- Working Capital………………………………………………………….…………..
……..14
- Current Ratio………………………………………………………………………. 2

………..15
- Quick Ratio…………………………………………………………………………….
……..16
- Debt to Equity Ratio……………………………………….……………………….
 The fundamental goal of any company's financial
statement analysis is to give the users of the financial
statements the information they need to make informed
decisions, evaluate the company's present and past
performance, and forecast the success or failure of the
firm.

Financial ratio analysis involves examining these ratios to

define the financial health of the organization.
Introduction
Financial statements are the fundamental and official
annual reports that a company's management uses to
share financial information with its owners and numerous
other external parties, such as investors, tax authorities,
the government, employees, and others.

These include the cash flow statement, the statement of a

company's profit and loss, and the balance sheet (position
statement) as of the end of the accounting period.

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 The most crucial financial ratios for business owners to
understand, what they reveal about the financial accounts
of the firm.

Ratio analysis is a quantitative method of gaining insight

into a company's liquidity, operational efficiency, and
profitability by studying its financial statements.

Every business uses the ratio as a tool to assess its

financial liquidity, debt load, profitability, and market
position relative to its competitors.
Objective and Methodology
Preparing Comparative Financial Statements primarily
aims to present data for a number of years in a more
straightforward and comparable format.

Simplification of data and to make them more

understandable and easier to compare.

Comparing revenue over time from operations, expenses

and liabilities, as well as profit and dividends pay.

Compare the financial performance of the company over a

number of years.
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Adjusted Trial Balance

This report is the adjusted trial

balance of Magic GMBA
Corporation for the year 2019.

All debit and credit accounts

are listed.
The 3 Financial Statements

Financial statements are written records that detail a company's operations and financial performance.

The income statement illustrates the profitability of the company

Income Statement
• Statement of operation/profit and loss

The Statement of retained earning look at the cash position of the

Statement of Retained Earning company .

Balance Sheet provides a snapshot of what a company owns and

Balance Sheet owes, as well as the amount invested by shareholders

• Statement of financial position

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Income Statement

Detailed Calculations:
- Gross Profit = Operating
Revenues – Costs of
Goods Sold.
- Total Expenses = Sum of
all the Expenses.
- Net Income = Gross Profit
– Total Expenses.
Retained Earning

Detailed Calculations:
Retained Earnings end of the year, December 31, 2019 = Retained 8

Earnings + Net Income – Dividends.

Balance Sheet

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Balance Sheet Detailed Calculations

- Total current Assets = Cash + Accounts Receivable – Allowance for Bad Debts + Net
Realizable Value + Inventory.
- Total Non-Current Assets = Long-term Investments + Property, plant, and equipment
- Accumulated Depreciation.
- Total Assets = Total Current Assets + Total Non-Current Assets.
- Total Current Liabilities = Accounts Payable + Accrued Payables + Unearned
Revenues.
- Total Non-Current Liabilities = Bonds Payable – Discount on Bonds Payable +
Deferred Income Tax + Other Long-term Liability.
- Total Liabilities = Total Current Liabilities + Total Non-Current Liabilities.
- Total Stockholders’ Equity = Preferred Stock + Common Stock + Additional Paid-in
Capital + Retained Earnings end of the year December 31, 2019 – Treasury Stock.
- Total Liabilities and Stockholders’ Equity = Total Liabilities + Total Stockholders’
Equity.
Assets

Assets = Liabilities + Shareholders’ Equity

Ratio Analysis

The Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability.
Different analysis can be conducted we list the following:
.

Performance Ratio Solvency Ratios Investor Ratios

• Net Profit margin • Current Ratio • Dividend yield,

• Return on assets (ROA) • Quick Ratio • Price Earning ratio,
• Return on equity(ROE) • Leverage or Gearing • Earnings per share (EPS),
• Operating cash flow/Interest paid • Dividend Pay out ratio
• Operating cash flow/Dividends paid
• Operating cash flow/Operating profit
 • Net Profit Margin

• Return on Asset

• Return on Equity

• Working Capital
Ratios and Ratio Analysis
• Current Ratio

• Quick Ratio

• Debt to Equity Ratio

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Net Profit Margin

The net profit margin is perhaps the most important measure of a company's overall
profitability it measures what percentage of sales comes from net income

Net Profit margin = Net Profit ⁄ Total revenue x 100

= 90,016/ 1,944,000x100
= 4%

The net profit of this company is 4% which is considered a low results.

A healthy profit margin for a small business tends to range anywhere between 7% to 10%

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Return on Asset -ROA

Investors can use ROA to find stock opportunities because the ROA shows how efficient a company is at
using its assets to generate profits.

ROA=Net Income/Total Asset

= 90,016/ 2,864,416
=0,031

ROA is equal to 3% which is considered a low ROA and it indicates that the company is not able to make
maximum use of its assets for getting more profits.  Usually an a ROA of over 5 % is generally considered
good and over 20% excellent. 

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 Return on Equity -ROE

Return on equity (ROE) is the measure of a company's net income divided by its shareholders'
equity.

ROE= 90,016/ 1,658,016=0.054

ROE is equal to 5% and is considered to be low, it indicates that the company did not use the capital
efficiently invested by the shareholders.

Generally, if a company has ROE above 20%, it is considered a good investment. The higher the
ROE, the better a company is at converting its equity financing into profits.

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Working Capital

Working Capital is a measure of company efficiency  It is measured as follow:

Working Capital = Current Assets – Current Liabilities

Working Capital = 2,210,016 – 355,200 = 1,854,816

Working capital result is positive thus indicating that the firm has more assets than liabilities.
Companies with high amounts of possess sufficient liquid funds needed to meet their short-term
obligations. It is an indicator that the company is able to continue its normal operations without
additional debt obligations.

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Current Ratio

Current ratio measures how many times you can cover your current liabilities

Current Ratio = = 6.221891892

Current Ration is high, it is a healthy indicator that means that the company generates
more revenue with its working capital but might be leaving a large amounts of assets
behind without investing in them thus causing inefficient operations.

This means that the company can pay for its current liabilities 6.22 times over.

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Quick Ratio

= 4.194864865

Quick ratio is high which means that the company has plenty of cash or cash equivalent
assets (assets that can be easily turned into quick cash) to cover any debt payments or
liabilities.

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Debt to Equity Ratio

Debt to Equity Ratio

Debt to Equity Ratio is less than 1 which means there are no risks for investors since the
company has sufficient equity funds and does not need to obtain debt in order to finance their
operations.

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Conclusion

Based on the ratio analysis conducted previously we can conclude the following:

• The company finacial position is healthy, it has more assets than liabilities.

• The company can performe normaly on daily basis with the ability to pay all
her debts and obligation.

• The company is not able to make maximum use of its assets for getting more
profits. 

• The company did not use the capital efficiently invested by the shareholders
be leaving a large amounts of assets behind without investing in them thus
causing inefficient operations.

• There are no risks for investors since the company has sufficient equity funds
and does not need to obtain debt in order to finance their operations.

• The company should execute new plans, strategies and investment to operate
and grow more efficiently.
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Thank you