Mba Finance Assignment

The group operates in a highly competitive market. New entrants stick the market on regular basis and current competitors continue to advance their standards. The popdoor market had die more attractive to the large retailers that challenges the concourse in pricing. Although the multitude generated a revenue of ? 267,7 million during the form it has an operating loss of (? 2 million) and loss before tax income of (? 14,4 million). Chief Executive Neil Gillis, expresss the primary accusatory of the assort is to reduce speak tos and debt. Over the year by managing supply chain more effectively, the Group reduced debt facility from ? 40 million to ? 35 million. David Bernstein, Chairman, admits that the Group experienced a difficult pecuniary year. On the other hand an improvement in working upper-case letter through a ? 5. 9m reduction in the level of inventory was achieved and new processes urinate been put in place to meet and improve on the level of avail big line of workman from this lower level of inventory.Cash management had a high level of snap through the year with improvements being do to supplier terms and a considerableer focus on collecting debts. Outdoor division maintain a sound performance in a problematic retail market, reporting a small reduction in operating pay compargond to the previous year. Accordingly, the Group strategy is to focus on this strength and to manage a structured exit from the Boardwear business. A great deal of change has occurred over the last year and this provide continue with a program of upgrading stores and converting stores from Boardwear to Outdoor.Ratio Interpretations ROTA(Return on total assets) The ROTA symmetry measures how effectively the troupe is utilizing its assets to generate amplification before salaried its interest and tax obligations. From the ROTA calculation it is observed that the attach to has made 6. 62% loss for separately ? of assets on its financial statements in 2008. In 2009 the union performed even worse in terms of ROTA with 12. 21% of loss for each ? hammer of assets on its books. When we take a deeper opinion into the calculation we analyze that the denominator has lessend by 14% which has a positive impact on the ratio.However the numerator therefore the loss of the high society has maturationd by 62% which impacted the ratio negatively. Considering the ROTA ratio and comparing the two years results It bath be said that the caller-out is liner problems with utilizing its assets and generating revenues. Profit Margin Profit margin ratio measures how often profit the company generates before stipending interest and tax. The company made a loss of 2. 52% for each ? of gross sales it made in 2008 and 4. 50 %for each castigate of sales made in 2009.Looking at the financials of the company we see that the cost of sales and dispersal costs has diminish in 2009 compared to 2008 which positively impact the advantageousness. Howe ver the revenues of the company have diminishd in 2009 and this moderate was larger than the total decrease in cost of sales and distribution costs. Consequently the company made a larger loss for each ? of sales made in 2009. Return on capital utilize (ROCE) Return on capital employed measures the efficiency and profitability of a companys capital investments. for each pound invested the company made -7,27 pences for 2008 and 13,93 pences for 2009.The decrease in ROCE is majorly imputable to the decrease in profit before tax. There is only a slight decrease in assets and liabilities from 2008 to 2009 which can off-set each other. Current ratio Current ratio is a measure of liquidity and is believed to be a good indicator of a companys ability to repay its outstanding loans. The company has ? 1,49 of current assets for each ? 1 of current liabilities in 2008 and ? 1,33 of current assets for each ? 1 of current liabilities in 2009. There is only a slight change between the two yea rs but looking for at the books we can say 2008 was more liquid for the company instead 2009. Quick ratioQuick ratio measures a companys ability to meet its short-term obligations with its most liquid assets. The quick ratio is more conservative than the current ratio because it excludes inventory from current assets. Inventory isexcludedbecausesome companies havedifficulty turning theirinventory into cash. As we look at our company we see that the company was successful in 2009 in turning inventory in cash but since the assets also decreased from 2008 to 2009 it was better in 2008 than 2009. Stock disorder Stock disorder ratio indicates the number of times a companys average inventory is sold during an accounting period.It can be said that the company turned its inventory over 2,43 and 2,44 times in 2008 and 2009 respectively. It means the company sells out its inventory in approximately 150 days, which is non very effective. This shows that the company ties bullion in stocks for a long time therefore it is non available to be used elsewhere. Fixed asset overthrow ratio Fixed asset turnover ratio measures a companys ability to generate net sales from bushel asset investments. A higher one shows the company has been more effective in utilize the investment in fixed assets to generate revenues.Changes in the ratio over time reflect whether or non the firm is becoming more efficient in the use of its fixed assets.. Even though 2009 ratio is slightly higher than 2008 it does not mean that the company become more efficient because looking at the financials we see that both revenues and fixed assets decreased from 2008 to 2009. Furthermore when we look at the details of fixed assets we saw the decrease is due to the accumulated depreciation. In other oral communication there is not an material decrease in fixed assets but in revenue there is. Debtors turnover ratioDebtors turnover ratio measures the days receivables are outstanding from the debtors. Lo oking at our company we see that the debtors turnover ratio decrease in 2009 compared to 2008. Therefore we can say that the company is collecting its receivables in shorter time intervals in 2009. In the ideal case the shorter collection periods indicates the effectiveness of the company. However in our case the company is already making loss and the shorter collection period cogency be due to the liquidity problems of the company. The company might be applying shorter terms to collect its receivables and pay its debts Debt to equity ratioDebt to equity ratio is used for researching the capital structure of a company. It indicates what proportion of equity and debt the company is using to finance its assets. In other words it shows the proportion of the company financed by creditors in comparison to that financed by stockholders. From our computations we can conclude that 80% of the company was financed by investors in 2008 when 20% is financed by creditors. In 2009 only 6% of the company is financed by creditors when 94% is financed by investors. We can say that the firm is willing to fund its operations with its own equity rather than debt.Income gearing Income gear ratio measures how much of its profits a company is spending on the defrayal of interest expense. Since the company in our case cant make any profit it is not meaningful to analyse this ratio. However it can be said that the company cant pay its with its cabbage but with the assets it has in hands. Profit per employee Profit per employee indicates the average profit generated per person employed. We can see that the company dismissed about four hundred employers during the year 2009 but this did not prevent profit per employee ratio to decline even more.In 2009 the company generated a loss of ? 5 million more than 2008 which could not be covered by the decrease in employees. Sales per employee Sales per employee ratio compares the pound playscript of sales against the total full time employe e equivalent of people working in the business. It provides a across-the-board indication of how expensive a company is to run. The sales per employee ratio is rather high for the company. Which means the company operates on lower overhead costs which translates into healthy profits. On the other hand looking at two years we can say that the company was more effective in 2008 than 2009.Even the company employed more people in 2008 than 2009 the revenues were also higher. Dividend per section (DPS) Dividend per share is the criterion of the dividend that the shareholders will receive for each share they own. Dividends are a form of profit distribution to shareholder thus looking at the financials it can be said that it can be optimistic to expect a growth since the dividend per share is in a declining trend from 2008 to 2009. Earnings per share (EPS) Earnings per share mean the portion of profit allocated to each outstanding share of common stock. It serves as an indicator of prof itability as well.In our case the EPS is in a negative trend. We see a large decrease from 2008 to 2009 about 20 pences. This shows the company is not making money. In our case this is a going trouble. The company should find ways to make money because money losing business will eventually go bankrupt. Dividend cover Dividend cover measures the ability of a company to maintain the level of dividend paid out. Since the dividend cover is -3,6 and -34,8 for 2008 and 2009 respectively it means the companys loss attributable to shareholders is 3,6 times the amount of dividend paid out for 2008 and 34,8 times the amount of dividend paid out for 2009.The reason the dividend cover declining that much from 2008 to 2009 is due to the decrease in both dividends and dough per share. Dividends have decreased 75% (from 4 to 1) while the earnings have decreased by more than 100% (from 14,4 to 34,8). Price Earnings ratio Price earnings ratio shows how much investors in market is willing to pay fo r companys earnings. We can see that there is an increase in P/E ratio from -12,3 to-1,2 in 2009. Even though the earnings per share decreased so did the market price of the stocks. I believe we would not be wrong saying investors are more optimistic about the future of the stock in 2009 than 2008.Dividend yield Dividend yield is the ratio that measures how much a company pays out in dividends relative to the market price of the share of the company. This ratio is distinguished for the investors considering investing in the shares of the company. Observing the shares of the two companies with equal share price, an investor will invest in the company with the higher dividend yield. In our case dividend yield for Blacks Leisure Group increased in from 2. 22 % to 2. 38 % in 2009 which will have a positive impact on the investment considerations of investors.However the company has made losses in the last two financial years the increase is mainly due the decrease in market price of th e shares of the company. This situation will possibly negatively affect the perceptions of the investors about the company. roe Return on equity measures the profitability by revealing how much profit a company generates with the money shareholders have invested. The company earned -7,2 pences for each pound invested by the stockholders in 2008 and -21 pences for each pound invested in 2009. Both the decrease in net income and equity resulted in a %14 decrease in return on equity.Conclusion As we look at our calculations, the companys financials and the auditors report we can see that the Group ability to continue is a going concern. The Group and Lloyds Banking Group are engaged in discussions regarding preparedness of a financial structure which will enable the Group to accelerate both the exit of the loss-making Boardwear business and the development of the Outdoor store portfolio. However the Directors are well aware that the loan facility will not be extended beyond August 20 09 and that there is a risk that the going concern may not be resolved satisfactorily.