Trial Balance Analysis & Summary Report

Executive Summary

Overall Financial Health: Strong balance sheet with substantial cash reserves and robust inventory assets. The company has significant revenues and a healthy liquidity position, but there are some expense and risk factors to monitor:

Very high cash & equivalents balance (over $42.6 million) and inventory assets ($10 million+), giving strong operational flexibility.
Substantial accounts receivable ($5.52 million) with a notable bad debt expense (~$0.79 million), suggesting possible collection risks or slow-paying customers.
Gross profit margin is solid; operating costs are sizable, especially advertising and payroll-related expenses.
Current liabilities such as account payables and taxes are manageable, though deferred revenues and accrued expenses are notable.
Watch for growing bad debt and aged receivables; continue to control discretionary expenses (e.g., advertising, travel).

Key Financial Ratios & KPIs

Ratio / KPI	Value	Meaning & Interpretation
Gross Profit Margin	35.37%	Percentage of revenue left after deducting cost of goods sold; higher is better and enables coverage of operating costs. = (Revenue – COGS) / Revenue
Operating Expense Ratio	26.63%	Portion of revenue spent on operating expenses; highlights cost efficiency. = Operating Expenses / Revenue
Current Ratio	4.98	Indicates short-term liquidity; values >1 show ability to cover short-term obligations comfortably. = Current Assets / Current Liabilities
Quick Ratio	3.44	Measures immediate liquidity, subtracting inventories from assets; values >1 are considered safe. = (Cash & Equivalents + Accounts Receivable) / Current Liabilities
Net Profit Before Tax	$890,588.84	Estimated net income before taxes & extraordinary items. Positive value is generally healthy (see calculation below).
Bad Debt Ratio	6.8%	Portion of receivables written off as uncollectible; should be monitored as it may signal collection issues. = Bad Debt Expense / Accounts Receivable

Ratio / KPI

Value

Meaning & Interpretation

Gross Profit Margin

35.37%

Percentage of revenue left after deducting cost of goods sold; higher is better and enables coverage of operating costs.
= (Revenue – COGS) / Revenue

Operating Expense Ratio

26.63%

Portion of revenue spent on operating expenses; highlights cost efficiency.
= Operating Expenses / Revenue

Current Ratio

4.98

Indicates short-term liquidity; values >1 show ability to cover short-term obligations comfortably.
= Current Assets / Current Liabilities

Quick Ratio

3.44

Measures immediate liquidity, subtracting inventories from assets; values >1 are considered safe.
= (Cash & Equivalents + Accounts Receivable) / Current Liabilities

Net Profit Before Tax

$890,588.84

Estimated net income before taxes & extraordinary items. Positive value is generally healthy (see calculation below).

Bad Debt Ratio

6.8%

Portion of receivables written off as uncollectible; should be monitored as it may signal collection issues.
= Bad Debt Expense / Accounts Receivable

Key Figure Calculations (rounded):

Total Revenue: $11,595,315
Total COGS: $7,496,245
Gross Profit: $4,099,070
Major OPEX (sum of main expenses): $3,086,041
Net Profit (approx., before tax): $4,099,070 – $3,086,041 – Bad Debt ($792,762) – Depreciation ($711,806) ≈ $890,588
Current Assets: Over $42.6 million (cash equivalents + receivables + inventory)
Current Liabilities: Approx. $8.57M (payables, accruals, taxes, deferred revenue, short-term notes)

Of Note: Transactions, Accounts, and Risks

Accounts Receivable: High balance ($5.52M) with a bad debt expense of $792K (6.8%)– this may indicate collections issues or risky credit policies.

Inventory Asset: Large at $10.06M; vital to monitor turnover and obsolescence risk, given sector.

Bank Accounts: Very high liquidity, with multicurrency accounts totaling over $42.6M (US, UK, AUD, JPY, EU, CA, DK).

Accounts Payable & Accruals: $3.24M + $2.94M = $6.18M; normal for a company of this size, but aging should be tracked.

Deferred Revenue: $1.38M in customer prepayments or obligations – ensure these are earned timely to prevent revenue recognition issues.

VAT, GST, PST, Sales Tax Liabilities: International compliance complexity with large amounts; VAT on Sales DE ($2.19M), GST/HST Payable ($872K), etc. could lead to compliance, audit, or cash flow risks.

Bad Debt Expense: Nearly 7% of outstanding A/R written off– careful customer screening, proactive collections needed.

Major Expense line items:

Advertising - $1.42M (high given revenue size, consider ROI review)
Payroll, salaries & benefits - $1.14M+
Travel, Auto, Depreciation - all notable; cost monitoring important.

High Cumulative Translation Adjustment of $3.14M: suggests material FX impacts from multi-currency operations.

Trends, Anomalies, and Potential Risks

Extremely liquid position, but overly large cash balances could indicate low investment in growth or operational caution; opportunity cost should be evaluated.

Bad debt and A/R aging are concerning; possible that credit terms are too generous or that some key customers are at risk of default.

High advertising spend relative to total OPEX and revenue; recommend reviewing advertising ROI.

International complexity: Significant VAT/tax liabilities, FX translation adjustments, and multiple bank accounts expose the company to compliance and currency volatility risk.

Deferred revenues and commissions payable balances: Watch for timely recognition and settlement to avoid compliance/operational PR risk.

Large inventory: Capital tied up; ensure inventory turnover is healthy. Otherwise, there’s risk of write-downs or obsolescence.

Actionable Insights

Strengthen accounts receivable management: tighter credit checks, incentivize fast payment, pursue overdue accounts.

Audit and potentially redeploy cash reserves: consider investing excess cash in growth, debt repayment, or improved shareholder returns.

Evaluate advertising and payroll effectiveness: perform ROI analysis to ensure spending is translating into revenue growth.

Regularly review and prepare for multi-currency and tax compliance risks.

Monitor and potentially lower bad debt ratio: set KPIs or targets for collections team.

Monitor and optimize inventory management to avoid capital drag or obsolescence losses.

Trial Balance Analysis & Financial Summary

Executive Summary

Key Financial Ratios & KPIs

Of Note: Transactions, Accounts, and Risks

Trends, Anomalies, and Potential Risks

Actionable Insights

Helpful Visualizations