Btec Business Unit 7 D2

Khadijatu Sesay
Unit 5,
D2: From your analysis in M2, decide which is the better performing business overall, and justify your decision.
In this task, I will be analysing the result of Turks Whole Sale and Turkish Great food, in terms of what business has performed better over the financial year. I will be using the financial ratios in both businesses, to critically explain which business has stood out in terms of profit, sustainability, and processes in their performance over the year.
Financial ratios asses, any aspect of the business, and is an integral part in the financial statement analysis of the business. Liquidity Ratios measures the ability of a company to pay off it short term debt. This helps the business assess whether it has sufficient cash or asset equivalent to be able to pay off it short term debt in due cause.
Profitability Ratios shows how profitable a business is in terms of measuring it overall performance. This ration helps to examine the overall profits made by the firm over the financial year, and helps us indicate whether the firm is
suffering a loos or making profit.
By looking at the financial ratios of both the businesses, it clearly indicates that Turks Wholesale is doing fantastically well than Turkish Great Food.
Having said that, I will say both businesses are in a line of competing against each other which looks healthy for both businesses. However, base on the gross profit, it shows that Turkish Great Foods made higher sales than Turks Wholesale. This does not indicate that Turkish Great Foods performed better than Turks Wholesale. The Net profit margin which tells us how much profit a business has made after deducting all expense shows the Turks Wholesale has made more profit than Turkish Great Foods. In this case, I will say Turks Wholesale Ltd has performed better in terms of profitability. Also looking at the Liquidity Ratio, it shows that Turks Great Food has more assets in their possession which is a resource to generate more income for the
business.
In the Efficiency Ratio, it shows that Turkish Foods stock were faster selling than Turks Wholesale. This shows that Turkish Great Food made more sales every month than Turks Wholesale. However, that didn’t indicate that Turks made more profit that Turkish Great Food. Profitability ratios which shows the profitability of both businesses shows that Turks Great Food has performed better than Turkish Great Food.
To help Turkish Great improve in there financial performances to generate more income, I will like to give Mr Ali and other stakeholders couple of advice on the limitations of the ratios to be taken under full consideration.
Firstly, Turkish Great Food should not use financial ratios in making decisions. Financial ratios helps in identifying problems that needs improvement, and helps point out the strength and weaknesses of the business. It will be of advantage for the business if Mr Ali consider not to use financial ratios as part of decision making. Turkish Great Food should not work on competitive measure with other businesses base of financial ratios results. Result achieved can be very misleading as certain business may use other figure to calculate their ratios while yours may be different from theirs. This can cause Turkish Great to either suffer from debt, or cause the business other financial failure. although this method is accepted in comparing results with other business in the same sector, I will advise that if Mr Ali wants to embark on this, he should make adequate research to know whether the business to be compared is using the figure as Turkish Great Food to have a clear view of how the business is performing in the market. Financial ratios always show result for the previous year, hence does not show the result for the operating year. This not sometimes not helpful, as businesses uses the future to make certain financial decisions. Past information can also be helpful for the business, but it is sometimes not required in certain case.
I will further Advice that Mr Ali focus on the limitations of the business which would help improve the business financial performances.