Financial Performance of La Suite Plc

The sales revenue of the company has been increasing over the past four years rapidly only the sales figure does not represent the performance of the company. The involvement of the cost incurred by the company should be analyzed as well. With the increasing sales revenue, the cost is increasing as well. The company no doubt improved the sales but was not able to control the cost incurred for the period. Although the sales increased the operating profit and profit before tax does not show such improvement which reflects a company’s poor performance regarding cost-effectiveness.
In the statement of the chief executive, the sure way for the increase in the shareholders’ wealth is the increase in sales and the increase in the assets of the company. Shareholders’ wealth shall be increasing when the company performance increases and the reserves of the company increases. The increase in the net profit of the company shall be the determinant factors, which ensures shareholders’ wealth as the performance of the company enhances.
The increases in the assets of the company compose of inventory and receivables. The increase in the inventory of the company reflects that the company s not able to sell the inventory and the inventory is stocking up. The increase in the receivables increase the risks of defaults and there is no provision for the doubtful debts thus the increase in such assets shall not be depicting the increase in the shareholders’ wealth.
The statement of the chief executive of the company reflects that the relevant costs of the investment project have not been taken accordingly and there are many errors in that too. All the relevant costs are not accounted for in the appraisal of the project. There are costs that are completely ignored in the evaluation of the project.
The opportunity cost of the contribution foregone of the existing hotels that amounts to the total of £570,000 per year which when accounted for shall amount to the financial acceptability of the project.&nbsp.