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Financial analysis of the Creative Chips - Case Study Example

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Financial analysis of the Creative Chips

rom this, as can be observed in the balance sheet of the company for the year 2002, there are wages which are yet to be paid by the company, which amount to $ 7,350. In addition to this information, it is also worth noting that the total expenditure incurred by the company in relation to payroll amounted to $ 89,850. Among the expenditure incurred in relation to payroll, $ 42,000 ($ 3,500 x 12) refers to salary of Lesay, therefore it is found that the amount which is related to the payment of wages is $ 89,850 - $ 42,000 - $ 12,000, i.e. $ 35,850. However, keeping in mind that there is an amount of wages payable therefore after accounting for the total payment made towards the salaries and wages expenses, there is still an amount of $ 7,500 left to be paid, and it is, therefore, recorded as wages payable in the balance sheet (Drury, 2007; Nikolai, Bazley, & Jones, 2009).
The company Creative Chips is involved in the business of manufacturing and selling chips. The overall financial information presented indicates that the company is performing satisfactorily in financial terms. The fact that company is utilizing its rented space in a way that it does not require additional space for manufacturing and storing its inventory stocks, is indicative of the efficient operations of the company. Apart from this, the gross profit amount as depicted in the income statement of the company is significant and can be regarded as highly favorable for the company. However, the operating expenses of the company are significantly high, which, as a result, have undermined the significance of the gross profit. The liquidity position of the company indicates that there are too much liquid assets held up by the company, which could have been invested for generating income from other sources (Webster, 2003; Nikolai, Bazley, & Jones, 2009).
The company’s operational efficiency can be questioned on the basis of the fact that there is only one employee who runs the manufacturing ...Show more
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Summary

This means that out of the total remuneration of $ 48,000 given to Nielson, $ 36,000 can be attributed to wages since 3/4 of his time working at…
Financial analysis of the Creative Chips case
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