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The report focus on the financial statement analysis of Tick-Tock during 2005 to 2007.And
at the same time provides the recommendation whether to purchase Tick-Tock for
$275,000 or continue looking for another business. This financial statement has been
divided into three segments: profitability, liquidity and financial stability .The first part is
profitability which focuses on different aspect of return on investment & evaluating
operating performance ratios. And the second segment concrete on the liquidity, as this
ratio measures a companys ability to pay short-term obligations, the current ratio of 2007
shows that the firm has a good short-term financial strength to meet its current liabilities.
The third part illustrates the financial stability of Tick-Tock Company, which indicates the
proportion of assets provided by creditors became more during the two years.
Probability
From the analysis of the data provide, we can know that the return on total asset ratio of
2005 is 37.36%, but in 2007 is 26.06%, the ratio has decreased by 11.3%.This means that
the company become less profit. The return on ordinary shareholders equity ratio also
decreased from 32.82% of 2005 to 24.17% of 2007, this ratio measures the return earned
on assets provided by owners, and the decreased ratio indicates the company using the
shareholder equity low efficient. These two ratios indicate that the business is making less
profitable return on their borrowed money during 2005 to 2007. From the horizontal
analysis which begins with the monetary amount change, we can see that compared to
2006, in 2007 net sales decreased by 2.21%, which leads directly to gross profit dropping
by 4.35%.And the ratio also shows that although the profit after tax has increased from
2005 to 2006, and then decreased in 2007. As the dividend payout ratio measures the
percentage of profits paid out to ordinary shareholders, a 148% dividend payout ratio in
2007 indicates the business paid more than one time of its profit as dividends and it has not
enough big power for growing. So according to these ratios Tick-Tock is making a
decreasing and not satisfactory profit during 2005 to 2007.
Liquidity
The current ratio of Tick Tock Pty Ltd from 18.83 in 2005 decrease to 7.41 in 2006 and
then decline to 4.81 in 2007. It indicates this company has the ability to meet its short-term
debt from its current. Maybe due to this company had many assents on hand, they used the
assets to do some investments and other stuff so that reduced the assets and they wanted to
