Accounting Analysis Report

Company: Dolla Financial Services Limited Analysis Date: September $2023$

Introduction

Dolla Financial Services Limited $($Dolla$)$ is a Jamaican microfinance company that provides loans to small and medium$-$sized enterprises $($SMEs$).$ The company was listed on the Junior Market of the Jamaica Stock Exchange in June $2022.$ This accounting analysis report aims to provide an overview of Dolla's financial position and performance as of September $2023.$

Financial Statement Analysis

Assets

Dolla's total assets as of September $2023$ amounted to $$1\mathrm{.}7$ billion. The composition of its assets is as follows:

$1.$ Loans Receivable: $77\%$

$2.$ Cash and Cash Equivalents: $10\%$

$3.$ Trade Receivables: $8\%$

$4.$ Property, Plant, and Equipment: $7\%$

Liabilities

Dolla's total liabilities as of September $2023$ amounted to $$535\mathrm{.}5$ million. The composition of its liabilities is as follows:

$1.$ Loans Payable: $80\%$

$2.$ Trade Payables: $11\%$

$3.$ Accrued Expenses: $6\%$

$4.$ Other Liabilities: $3\%$

Equity

Dolla's total equity as of September $2023$ amounted to $$693\mathrm{.}4$ million. The composition of its equity is as follows:

$1.$ Retained Earnings: $86\%$

$2.$ Share Capital: $14\%$

Ratio Analysis

$1.$ Current Ratio

Dolla's current ratio as of September $2023$ is $6\mathrm{.}0,$ indicating that the company has $6$ times more current assets than current liabilities. This strong ratio suggests that Dolla is well$-$positioned to meet its short$-$term obligations.

$2.$ Quick Ratio

Dolla's quick ratio as of September $2023$ is $3\mathrm{.}0,$ indicating that the company has $3$ times more liquid assets $($cash and cash equivalents and trade receivables$)$ than current liabilities. This is another strong ratio, indicating a healthy financial position.

$3.$ Debt$-$to$-$Equity Ratio

Dolla's debt$-$to$-$equity ratio as of September $2023$ is $3\mathrm{.}5,$ indicating that the company has $3\mathrm{.}5$ times more debt than equity. While this is a relatively high ratio, the strong current and quick ratios suggest that Dolla effectively manages its debt levels.

$4.$ Return on Equity $($ROE$)$

Dolla's return on equity $($ROE$)$ as of September $2023$ is $28\mathrm{.}57\%,$ indicating that the company is generating a good return on its equity investment. This reflects a profitable company.

Additional Observations

$$ Dolla's loan portfolio has experienced significant growth, positioning the company to benefit from the growing demand for microfinance services in Jamaica.

$$ The company's credit quality has improved in recent years, suggesting effective risk management.

$$ As a relatively new company listed on the Junior Market in June $2022,$ Dolla has a limited track record, which investors should consider before investing.

Recommendation

Dolla Financial Services Limited presents a compelling investment opportunity for those seeking a company with strong growth potential and a high ROE. However, prospective investors should exercise caution due to the relatively high debt$-$to$-$equity ratio and the company's limited track record. A comprehensive risk assessment is advised before making investment decisions. What financial charts link these ratios?