Brief analysis of financial performance

Brief analysis of financial performance after commencement of operations September 2022.

Financial performance is generally measured by reviewing the three main financial statements of a business: 1. Income Statement, 2. Balance Sheet, and 3. Cashflow Statement.

By reviewing these statements and with the appropriate skills, one is able to have a meaningful insight in the financial performance of a business entity. This is not surprising since the three statements are actually connected to each other. But the focus of each is from different perspective of the business.

In the case of IMJO, the reported loss reflect the usual results of a business at the first year upon commencement.

However, in the cashflow statement, the amount shown as cashflow deficit is much lower than the reported loss. Why is this? This is where the difference between accrual accounting vis-à-vis cash flows need to understood. From cashflow perspective, after the main activities from which cashflows are worked-out, the deficit suffered by IMJO is RM24 thousand cash-wise, and not the RM107 thousand loss reported in the income statement.

Thus, the notion “profit does not equate to cash”. Profit (or loss) is determined by the difference between revenue and cost, whereas cashflow is based on cash balances.

Lastly, the balance sheet gives an indication on the strength of the business entity to continue. With asset capitalisation of close to RM2.3 million (unaudited), the business looks capable to proceed as a business entity, insya Allah. This is enhanced by the point that there is no loans or external borrowings in its financial statements at the end of the financial year.

In summary, analysis of financial performance calls for the availability of the financial statements of a business entity. Hence the importance of these statements being available to the business. The interpretation of the analysis will, of course, depends on the analyst and the points he or she wishes to highlight.

IMJO.