Warren Buffet’s Investment Advices Assessment 2

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Question

Write an assessment on Financial and Market Performance Analysis and Warren Buffet's Investment Advices

Solution

Introduction

Financial ratios play a significant role in predicting a company’s performance to meet the requirements of any decision-maker (Delen, Kuzey, & Uyar, 2013). Determining performance with the assistance of financial ratios is being used traditionally and as a powerful decision-making tool for analysts, creditors, investors, finance experts and competitors (Cascino, Clatworthy, Osma, Gassen, Imam, & Jeanjean, 2014). Conducting a ratio analysis helps stakeholders to understand the financial health of their companies as well as to determine their competitive position against rival companies. For instance, Warren Buffet, one of the leading investors in the world, considers the numerical figures in a company’s financial statements and those that have direct implications on his shareholding (Reese, 2011). Financial ratios allow him to assess the financial statements to determine attractive stocks for investments. Publishing solid results consistently over the long term increases the possibility of mobilising funds through equity investors. This report assesses the financial statements of Gelato Industries using the financial ratio calculation and interpreting the results against the industry average through the approaches of Warren Buffet.

1. Financial Analysis of Gelato Industries

Financial analysis of a company is a fundamental analysis that uses the reported financial figures to derive a conclusion about the company's performance and financial position (Birt, Chalmers, Maloney, Brooks, & Oliver, 2016). The main objective of the users of the financial statements is to assess the past decision of the company and decide on a suitable future course of action. The financial statement is considered historical data. Hence, in order to forecast the future, an analysis of the past data is considered an important stepping stone. This would highlight the pros and cons of a company’s performance. It offers an opportunity to evaluate past financial well-being to predict a company’s future financial capability. In this regard, based on the given financial statements, the financial ratios of Gelato industries are calculated (Appendix A).