Write memo to managing director of worst performing company

Assignment Help Business Management
Reference no: EM13935472 , Length: 2700 Words

Accounting and Finance for Managers-ACC3015 

Question

The following financial data (a,b,c)is forthree retail businesses, which are listed on the London Stock Exchange.

a)  Tesco PLC

Tesco PLC

 

 

 

 

 

Annual Ratios

 

 

 

 

 

[GBP Millions]

 

 

 

 

 

 

22-Feb-2014

23-Feb-2013

25-Feb-2012

26-Feb-2011

27-Feb-2010

Financial Strength

 

 

 

 

 

Current Ratio

0.61

0.66

0.64

0.65

0.71

Quick/Acid Test Ratio

0.42

0.43

0.43

0.45

0.51

Working Capital

-8,314.0

-6,520.0

-6,896.0

-6,123.0

-4,623.0

Long Term Debt/Equity

0.63

0.60

0.56

0.59

0.80

Total Debt/Equity

0.76

0.65

0.66

0.67

0.91

Long Term Debt/Total Capital

0.36

0.37

0.34

0.35

0.42

Total Debt/Total Capital

0.43

0.39

0.40

0.40

0.48

Interest Coverage

24.82

32.63

-

217.61

72.02

Payout Ratio

62.15%

77.40%

37.51%

42.00%

44.49%

Effective Tax Rate

15.36%

25.72%

21.64%

23.73%

26.45%

Total Capital

25,928.0

27,477.0

29,524.0

27,610.0

27,869.0

 

 

 

 

 

 

Efficiency

 

 

 

 

 

Asset Turnover

1.27

1.26

1.30

1.30

1.24

Inventory Turnover

16.27

16.14

17.31

18.78

19.38

Days In Inventory

22.43

22.61

21.08

19.43

18.84

Receivables Turnover

11.87

12.76

13.90

14.61

15.95

Days Receivables Outstanding

30.75

28.61

26.26

24.98

22.89

Revenue/Employee

124,513

125,097

122,993

123,795

120,548

Operating Income/Employee

5,154

4,700

8,047

8,021

7,323

EBITDA/Employee

8,177

7,766

10,855

10,929

10,254

 

 

 

 

 

 

Profitability

 

 

 

 

 

Gross Margin

6.31%

6.55%

8.44%

8.48%

8.10%

Operating Margin

4.14%

3.76%

6.54%

6.48%

6.07%

EBITDA Margin

6.57%

6.21%

8.83%

8.83%

8.51%

EBIT Margin

4.14%

3.76%

6.54%

6.48%

6.07%

Pretax Margin

3.55%

3.24%

6.32%

6.02%

5.58%

Net Profit Margin

3.01%

2.42%

4.94%

4.57%

4.09%

COGS/Revenue

93.69%

93.45%

91.56%

91.52%

91.90%

SG&A Expense/Revenue

2.61%

2.34%

2.52%

2.71%

2.68%

 

 

 

 

 

 

Management Effectiveness

 

 

 

 

 

Return on Assets

3.81%

3.03%

6.46%

5.96%

5.10%

Return on Equity

12.22%

8.90%

18.40%

17.74%

16.96%

 

 

 

 

 

 

Valuation

 

 

 

 

 

Free Cash Flow/Share

0.00

-0.02

0.09

0.09

0.22

Operating Cash Flow/Share

0.36

0.35

0.55

0.53

0.59

 

 

 

 

 

 

Current Market Multiples

 

 

 

 

 

Market Cap/Earnings (TTM)

17.55

 

 

 

 

Market Cap/Equity (MRQ)

1.12

 

 

 

 

Market Cap/Revenue (TTM)

0.24

 

 

 

 

Market Cap/EBIT (TTM)

6.02

 

 

 

 

Market Cap/EBITDA (TTM)

3.75

 

 

 

 

Enterprise Value/Earnings (TTM)

28.04

 

 

 

 

Enterprise Value/Equity (MRQ)

1.79

 

 

 

 

Enterprise Value/Revenue (TTM)

0.39

 

 

 

 

Enterprise Value/EBIT (TTM)

9.62

 

 

 

 

Enterprise Value/EBITDA (TTM)

5.99

 

 

 

 

 

b)  Morrisons PLC

 

WM Morrison Supermarkets PLC

 

 

 

 

 

Annual Ratios

 

 

 

 

 

[GBP Millions]

 

 

 

 

 

 

02-Feb-2014

03-Feb-2013

29-Jan-2012

30-Jan-2011

31-Jan-2010

Financial Strength

 

 

 

 

 

Current Ratio

0.50

0.58

0.57

0.55

0.51

Quick/Acid Test Ratio

0.16

0.20

0.21

0.21

0.19

Working Capital

-1,443.0

-992.0

-981.0

-948.0

-1,060.0

Long Term Debt/Equity

0.53

0.46

0.29

0.19

0.21

Total Debt/Equity

0.65

0.47

0.31

0.19

0.25

Long Term Debt/Total Capital

0.32

0.31

0.22

0.16

0.17

Total Debt/Total Capital

0.39

0.32

0.24

0.16

0.20

Payout Ratio

-127.08%

44.28%

40.10%

40.10%

35.96%

Effective Tax Rate

-

26.39%

27.14%

27.69%

30.30%

Total Capital

7,725.0

7,662.0

7,094.0

6,472.0

6,169.0

 

 

 

 

 

 

Efficiency

 

 

 

 

 

Asset Turnover

1.66

1.78

1.86

1.84

1.81

Inventory Turnover

20.34

21.96

23.54

25.24

26.79

Days In Inventory

17.95

16.62

15.50

14.46

13.62

Receivables Turnover

87.31

81.97

78.15

88.84

77.05

Days Receivables Outstanding

4.18

4.45

4.67

4.11

4.74

Revenue/Employee

337,953

322,481

308,961

282,722

276,646

Operating Income/Employee

-1,816

16,893

17,020

15,509

16,283

EBITDA/Employee

5,620

23,373

22,827

20,982

21,776

 

 

 

 

 

 

Profitability

 

 

 

 

 

Gross Margin

6.07%

6.66%

6.89%

6.97%

6.89%

Operating Margin

-0.54%

5.24%

5.51%

5.49%

5.89%

EBITDA Margin

1.66%

7.25%

7.39%

7.42%

7.87%

EBIT Margin

-0.54%

5.24%

5.51%

5.49%

5.89%

Pretax Margin

-1.00%

4.85%

5.36%

5.30%

5.57%

Net Profit Margin

-1.35%

3.57%

3.91%

3.84%

3.88%

COGS/Revenue

93.93%

93.34%

93.11%

93.03%

93.11%

SG&A Expense/Revenue

2.01%

1.85%

1.86%

1.96%

2.04%

 

 

 

 

 

 

Management Effectiveness

 

 

 

 

 

Return on Assets

-2.24%

6.35%

7.26%

7.06%

7.04%

Return on Equity

-4.80%

12.18%

12.76%

12.19%

12.63%

 

 

 

 

 

 

Valuation

 

 

 

 

 

Free Cash Flow/Share

-0.13

0.05

0.05

0.12

-0.06

Operating Cash Flow/Share

0.31

0.47

0.37

0.34

0.28

 

 

 

 

 

 

Current Market Multiples

 

 

 

 

 

Market Cap/Earnings (TTM)

-12.70

 

 

 

 

Market Cap/Equity (MRQ)

0.88

 

 

 

 

Market Cap/Revenue (TTM)

0.24

 

 

 

 

Market Cap/EBIT (TTM)

6.64

 

 

 

 

Market Cap/EBITDA (TTM)

4.09

 

 

 

 

Enterprise Value/Earnings (TTM)

-20.63

 

 

 

 

Enterprise Value/Equity (MRQ)

1.43

 

 

 

 

Enterprise Value/Revenue (TTM)

0.39

 

 

 

 

Enterprise Value/EBIT (TTM)

10.78

 

 

 

 

Enterprise Value/EBITDA (TTM)

6.64

 

 

 

 

 

c)  Sainsbury PLC

J Sainsbury plc

 

 

 

 

 

Annual Ratios

 

 

 

 

 

[GBP Millions]

 

 

 

 

 

 

15-Mar-2014

16-Mar-2013

17-Mar-2012

19-Mar-2011

20-Mar-2010

Financial Strength

 

 

 

 

 

Current Ratio

0.64

0.61

0.65

0.59

0.66

Quick/Acid Test Ratio

0.48

0.25

0.33

0.27

0.36

Working Capital

-2,403.0

-1,214.0

-1,104.0

-1,221.0

-940.0

Long Term Debt/Equity

0.37

0.45

0.46

0.43

0.47

Total Debt/Equity

0.46

0.48

0.48

0.44

0.49

Long Term Debt/Total Capital

0.26

0.30

0.31

0.30

0.32

Total Debt/Total Capital

0.32

0.32

0.33

0.31

0.33

Payout Ratio

45.83%

52.19%

50.36%

43.86%

44.22%

Effective Tax Rate

20.27%

22.02%

25.16%

22.61%

20.19%

Total Capital

8,787.0

8,619.0

8,488.0

7,837.0

7,396.0

 

 

 

 

 

 

Efficiency

 

 

 

 

 

Asset Turnover

1.64

1.86

1.88

1.90

1.91

Inventory Turnover

22.65

22.88

24.09

26.34

27.15

Days In Inventory

16.11

15.95

15.15

13.86

13.44

Receivables Turnover

25.04

85.67

78.64

93.17

129.22

Days Receivables Outstanding

14.58

4.26

4.64

3.92

2.82

Revenue/Employee

484,798

474,603

456,844

438,711

422,072

Operating Income/Employee

20,425

17,963

17,910

17,692

15,011

EBITDA/Employee

31,579

28,493

28,135

27,713

25,137

 

 

 

 

 

 

Profitability

 

 

 

 

 

Gross Margin

5.79%

5.48%

5.43%

5.50%

5.42%

Operating Margin

4.21%

3.78%

3.92%

4.03%

3.56%

EBITDA Margin

6.51%

6.00%

6.16%

6.32%

5.96%

EBIT Margin

4.21%

3.78%

3.92%

4.03%

3.56%

Pretax Margin

3.75%

3.31%

3.58%

3.92%

3.67%

Net Profit Margin

2.99%

2.58%

2.68%

3.03%

2.93%

COGS/Revenue

94.21%

94.52%

94.57%

94.50%

94.58%

SG&A Expense/Revenue

1.82%

1.98%

1.88%

1.98%

2.00%

 

 

 

 

 

 

Management Effectiveness

 

 

 

 

 

Return on Assets

4.90%

4.81%

5.04%

5.75%

5.60%

Return on Equity

12.09%

10.42%

10.73%

12.32%

12.52%

 

 

 

 

 

 

Valuation

 

 

 

 

 

Free Cash Flow/Share

0.01

-0.06

-0.10

-0.16

-0.02

Operating Cash Flow/Share

0.49

0.52

0.56

0.46

0.54

 

 

 

 

 

 

Current Market Multiples

 

 

 

 

 

Market Cap/Earnings (TTM)

185.15

 

 

 

 

Market Cap/Equity (MRQ)

0.83

 

 

 

 

Market Cap/Revenue (TTM)

0.19

 

 

 

 

Market Cap/EBIT (TTM)

5.26

 

 

 

 

Market Cap/EBITDA (TTM)

3.15

 

 

 

 

Enterprise Value/Earnings (TTM)

248.56

 

 

 

 

Enterprise Value/Equity (MRQ)

1.12

 

 

 

 

Enterprise Value/Revenue (TTM)

0.26

 

 

 

 

Enterprise Value/EBIT (TTM)

7.06

 

 

 

 

Enterprise Value/EBITDA (TTM)

4.23

 

 

 

 

 You are required to:

(a) Select and justify at least 10 financial ratios and calculate 2 non-financial ratios to analyse the performance and financial position of the three companies. You are expected to use charts to compare performance of the three companies. You will need to look at the audited financial statement and carry out further research to explain the performance of the company over the five years. For clarity, you are expected to rank the companies based on the individual benchmarks and overall.

(b) Write a memo to the managing director of the worst performing company with recommendations of how the financial performance of the business can be improved.

(c) Outline the limitations of relying on financial ratios to interpret firm performance?

Verified Expert

Reference no: EM13935472

Questions Cloud

Obtained in your contextual inquiry : Overview of your informant and their work. Give some brief description about the setting, objects and people in the environment, goals of the work, and so forth. (Do not include people's real names, but job titles are okay.) [150 - 250 words]
Below is a partial production cost report : Classic 50s flooring produces linoleum flooring. Below is a partial production cost report for the Mixing Department.
External issues that are affecting the company : Evaluate the external issues that are affecting the company and have driven it to employ a strategy that has resulted in moving jobs offshore.
Paper - volkswagen huge diesel scandal : Write a research paper on given topic. Topic: Volkswagen's huge diesel scandal. You should be researchingyour topic as delivered to me earlier in the semester to write your paper focusing on the ethical,legal, and social responsibility issues that..
Write memo to managing director of worst performing company : Write a memo to the managing director of the worst performing company with recommendations of how the financial performance of the business can be improved.
Would the cells present have had to grow : Hamburger ground under the best condition often has a bacterial count of 1000-10,000 per g due to contamination. If your sample had 10^6 bacteria per g, could this number have been just contamination or would the cells present have had to grow? W..
What is maximum initial cost company would be willing to pay : Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.72 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..
Consultants to bring gala information security : A project plan which incorporates the essential components of project management. This will include personnel, the activities to be undertaken by each team member, a timeline using an appropriate planning tool, the risks and threats to successful ..
Hr managers need to be up to the challenge : Written Analytical Essay (Individual) "Organisations are experiencing unprecedented levels of change in their environment, and HR managers need to be up to the challenge."

Reviews

Write a Review

Business Management Questions & Answers

  Distinguishing transactional and transformational leadership

Distinguish between transactional and transformational leadership. Give specific examples.

  Illustrate what is ikea strategy toward its suppliers

Illustrate what is IKEA's strategy toward its suppliers? Explain how important is this strategy to IKEA's success? Illustrate what is the source of IKEA's success today? Can you see any weakness in the company? Illustrate what might it do to correc..

  Discuss in detail the role that an ids and ips would play

Discuss in detail the role that an IDS / IPS would play in the IR efforts, and explain how these systems can assist in the event notification, determination, and escalation processes

  Organizational learning and knowledge management

explain the relationship between organizational learning and organizational knowledge and the affect of knowledge management

  Explained how a leader can model the way for others

Identified a leader who is considered an example of good leadership or among the most admired in the country and produced a profile of that leader's positive attributes.

  Ceo anne mulcahy implemented xerox new strategy

Xerox is a very familiar corporate name in the United States. There was a time, however, when the company was faltering and needed to adapt to foreign competition. This exercise will help you see how complex such change can be.

  We have to bring this new drug to market

We have to bring this new drug to market if we are going to be a player in this industry.

  Presume that technophiles are willing to pay

Presume that technophiles are willing to pay $400 now for the latest iPhone however only $300 if they have to wait a year. Normal people are eager to pay $250 and their desire to purchase doesn't vary with time.

  What factors might a terrorist consider

What factors might a terrorist consider when selecting a biological threat agent for use in an attack?  Having a common set of terms and concepts is important for communication in any specialized subject , what is the difference between: a. A bacteri..

  Profitability and economics of concentrate

Compare the economics of the concentrate business to that of the bottling business. Why is the profitability so different and how has the competition between Coke and Pepsi affected the industry's profits

  Compare and contrast organization development

Compare And Contrast Organization Development And Organization Transformation How Are They Similar Or Dissimilar

  Identify dynamic capabilities in your organization

Identify dynamic capabilities in your organization. Use Teece, Pisano, and Shuen's paper to justify why and how these capabilities are contributing to competitive advantage and outline how they differ from "resources" as identified by Barney.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd