M3
Smallwood LTD should always be aware of any issues to do with their financial state. By looking through their profit & loss and balance sheets, there are a few issues that have been noticed.
Firstly, the cost of sales jumped by £43,000 from £307,000 in 2005 to £350,000 in 2006. However, in 2007 this number did decrease by £20,000 to £330,000. This is an issue because in 2006 and 2007 it was costing Smallwood a lot more money to get things such as materials from making and selling a product.

Smallwood’s net profit in 2005 was £22,000 but this decreased by £2,000 to £20,000 in 2006. The net profit then increased in 2007 by £4,000 to £24,000. This is an issue because the net profit should be larger than the total expenditure, which is the amount of money available to spend. Connected to this is the net profit % which in 2005 was at 3.2% of revenue which gets distributed to investors or to the company. However, in 2006 this % dropped to 2.8% and then increased again in 2007 to 3.6%. The issue with this is that in 2006 there was less money to distribute to investors or within the company but in 2007 there was more than there has been in 2005 and 2006 to distribute out.

Smallwood’s interest in 2005 was £46,000 and then this went up by £8,000 in 2006 to £54,000. In 2007 this number increased again by £7,000 to £61,000. This is an issue because Smallwood are paying more interest each year which looks bad on the company. This could be because they are behind on loan repayment or the APR% may have increased. Related to this is the interest cover ratio. In 2005 this ratio was 1.5% and in 2006 this figure decreased to 1.3%. In 2007 this figure went up marginally to 1.4%. This is an issue because the decrease in 2006 and 2007 meant that Smallwood had less money to cover interest payments and therefore less money to keep for themselves.

In 2005 Smallwood’s