To evaluate and analyse this aspect of the company’s position, certain financial ratios have also been used in the report.
The greatest internal risk faced by the company is the declining of profit over the last financial year, if this trends continue to take place, the company will be generating no more funds for investment and even there would be left nothing in the company to be transferred to the shareholders in the form of dividends or earnings per share.
The company also confronts with the risk of losing all its business because of the costs incurred during the production and distribution of goods, and also the other operating expenses incurred during the year.
According to Wells and Nieuwenhuis (2001), the automotive industry in UK has been highly saturated and the companies need to face great competition from other companies in the same industry. Hence, there is a high risk of increasing competition.
Wells and Nieuwenhuis (2001) further specify that the competition is not the only risk a company has to confront with, there are certain other factors that increase the risk of doing business in UK automotive industry. These factors are globalisation, consolidation, and continuous innovations in the technology.
Bordenave and Lung (1996) says that the most important risk a company faces in the automotive industry in UK is due to the increasing outsourcing activities on the part of the manufacturers. Therefore, a geographical risk arises in such a situation where supplier and manufacturer are from geographically distant and different places.
Analysing the profitability of Buzzard Ltd lies in assessing the company’s profit with respect to various other items from income statement and balance sheet. This can be done with the help of the following ratios:
The Gross Profit ratio analyses the company’s profit margin before accounting for various operating costs (Mcmenamin Jim,