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May 01, 2023

Answer:

Introduction

Due to the rapid evolving threat around the COVID-19 virus, which is commonly termed as coronavirus, has impacted the business and Investors Community Globally (www.ey.com, 2022). This report gives brief understanding of the problem BGC ltd is facing that generally provide cleaning services to retail and office sectors. BGC ltd was having a tremendous growth in the last five years but due to the emergence of covid 19, the growth of the company began to falter from the year 2020. Thus, in order to understand the financial performance of the business, ratio analysis has been conducted. This would enable the board of directors to highlight any areas of opportunities or threats. The analysis of cash budgeting would help the company to understand whether any flaws exist in their budgeting method. This paper also gives recommendation about the financial plan suitable for the business which involve shutting down the retail services or opting for services in domestic market.

Discussion

Part A

The term ratio generally involves relationship between certain figures (Koen & Oberholster 1999). While doing Ratio analysis evaluation of data from current and historical financial statements are done to understand organization’s financial performance in the overall industry (Analysis, 2022). Financial ratios are used to make evaluation of business and managerial success, ability to pay its short-term debt as well as any statutory regulation of entity’s performance (Barnes 1987)

Profitability ratios are financial metrics used to determine ability of the organization to earn profit (Bragg and Bragg, 2022). The result showed that during 2021 the gross profit margin has reduced to half the percentage of gross profit earned during the year 2020. The gross profit margin ratio during 2021 is 3.94% however in the year 2020 it was 6.81%. Prior to the year 2020 the Gross profit of the company was higher. Similarly, the net profit margin ratio of the company also showed a significant decline in its earning capacity.

Return on capital employed on the other hand also determines the efficiency of the company to generate profit by utilizing its capital (www.myaccountingcourse.com, 2022). The ratio showed 2.33% in 2021 however in the past year the entity has 13.80% ratio, analysing the past year ratios it shows a declining trend.

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