Question

Write the summary on the financial position of Philips. Your summary should include the main financial data of the company. [Marks (Words): 10(200)]

Annual Report of PHILIPS: https://www.results.Philips.com/publications/ar19

Answer 1

Hi,

Summary on Financial Position of Philips:-

Philips a company striving for leadership in health technology and it believes that innovation can improve people's health and healthcare outcomes as their Tagline is "Innovation with Purpose". If we read Independent's Auditor Report then we come to know that their Audior "Ernst & Young LLP" has given an Unqualified Opinion which Reasonably states that Financial Statement of company is free from material Mis-statements. Also, if we see Going Concern of the company then we will come to conclusion that there is no uncertainity regarding Going Concern Assumption. Coming to Financial Data, Income Statements Of Company as a Whole of Philips shows following Points:-

1. The Sales in 2018 (Previous Year) is EUR 401 Millions as compared to EUR 377 Million in 2019 (Current Year) Which shows a decrease in Saes by Approximately ~ 6%.
2. Although, Sales is reduced by ~6% but the Net Profit is Increased from EUR 1090 Million in 2018 to EUR 1167 Million in 2019 which is approximately ~7%.
3. Company's selling Expense has been Reduced from EUR 49 Millions in 2018 to EUR 8 Million in 2019 which is ~84% due to which there is Increase in Net Profit in 2019 even when Sales Decline

Now, If we analyze the "Balance Sheet Before Appropriation of Results" of the Philips Company then we will found Following Points:-

1. Current Financial Asset of the Company has been reduced Substantially from EUR 436 Million to EUR 1 Million that is Approximately ~ 99.78 % Decline.
2. Company has a Revaluation Reserve (ficticious Reserve) of EUR 327 Million in 2019 as compared to EUR 191 Million which has been increased by 71.2%.
3. Long term Provisions of company has been Increased Substantially from EUR 2 Million to EUR 23 Million which is ~ 1050 % Increase.
4. The Current Ratio of the company is ~ 0.44 which shows that Assets of the comapny is not too Liquid.
5. If we calculate Solvency Ratio of the Comapny then it comes to 30% which is greater than acceptable limit.

Hence in the conclusion we can say that Company is solvent but their Current Asset is less than it's current liablitity hence it's not Liquid Company as per Financial Year ending 2019.

Thanks & Regards !