PLC should invest in Project 1 because it is better than Project 2

Financial management plays a crucial role in business performance, allowing companies to assess their financial performance and make informed investment decisions. The two projects analyzed show that Project 1 has better Net Present Value (NPV), shorter payback period, higher Annualized Return Rate (ARR) and Internal Rate of Return (IRR), making it more attractive than Project 2. This highlights the importance of using various tools of financial management to evaluate investment opportunities and make strategic decisions.

FINANCIAL
MANAGEMENT
April, 2013

Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Company Overview.....................................................................................................................1
1.1 Ratio Calculation...................................................................................................................1
Profitability Ratios...................................................................................................................1
Liquidity Ratio.........................................................................................................................2
Performance Ratio...................................................................................................................3
Efficiency Ratios.....................................................................................................................3
1.2 Evaluation and Recommendations........................................................................................4
1.3 Summarised Report...............................................................................................................7
PART 2............................................................................................................................................8
2.1 Assessing the viability of the competing investment projects...............................................9
2.2: Payback Period Method......................................................................................................12
2.3 Advantages and Disadvantages...........................................................................................13
2.4 Summarised Report.............................................................................................................15
CONCLUSION..............................................................................................................................16
References......................................................................................................................................17
APPENDIX....................................................................................................................................18

List of Tables
Table 1 Ratio Calculation................................................................................................................4
Table 2 Summarised Report of Ratio Analysis...............................................................................7
Table 3 Calculation of NPV for Project 1.......................................................................................9
Table 4 Calculation of NPV for Project 2.......................................................................................9
Table 5 Calculation of IRR for Project 1.......................................................................................10
Table 6 Calculation of IRR for Project 2.......................................................................................11
Table 7 Calculation of Payback Period for Project 1....................................................................12
Table 8 Calculation of Payback Period for Project 2....................................................................13
Table 9 Summarised Report..........................................................................................................15

INTRODUCTION
In the present business environment, the key role is played by financial manager in
business performance. The financial manager has to plan, organize, direct and control the
financial activities of the organization. Finance is one of the most important resources for any
organization and in order to have effective business performance a manager needs to take
optimum utilization of its financial resources. The role of financial manager is to apply the
general management principles to financial resources of the organization.
The aim of the study is to provide an in-depth understanding of financial tools and
techniques that help a manager in making effective decisions. This report will be divided into
two major parts, first part includes the financial analysis of an organization and another part
includes the evaluation of two strategic investment projects.
PART 1
Company Overview
Wm Morrison Supermarkets plc (registered on LSE i.e. London Stock Exchange) is the
fourth largest food retailer in UK with its more than 400 stores. It was founded in 1899 and
presently branded as Morrisons. As on January, 2013 Company’s total revenue was £18,116m
(LSE, 2013).
1.1 Ratio Calculation: Most of the organizations publish their annual reports including their
financial statements for the year. Ratio analysis is the tool that is used for quantitative analysis of
those financial statements. The monetary growth of the organization can be identified by
calculating the ratios and comparing them with previous year ratios. Ratios can also be used for
comparing the business performance with any other organization or industry. On the basis of
financial statements, several ratios can be calculated that indicates the performance, financing,
activities and liquidity of the company (Arnold, 2005). Some common ratios for Wm Morrison
Supermarkets plc are being calculated below:
Profitability Ratios: It is a class of financial metrics that indicates the ability of company to
generate earnings as compared to its expenses and other relevant costs. Some key profitability
ratios are gross profit margin, net profit margin and return on equity (Collier, 2012).
Gross profit margin and Net Profit Margin for the past three years:
Page | 1

Gross Profit Margin= Gross Profit
Net Sales ∗100
Net Profit Margin= Net Profit
Net Sales ∗100
2013 2012 2011
Net Sales (£m) 18116 17663 16479
Gross Profit (£m) 1206 1217 1148
Net Profit (£m) 637 621 636
Gross Profit Margin 6.657099 6.890109 6.966442
Net Profit Margin 3.516229 3.515824 3.859457
Return on Equity for the past three years:
ROE= Net Income
Shareholde r' s Equity ∗100
2013 2012 2011
Net Income (£m) 637 621 636
Shareholder’s Equity (£m) 5230 5397 5420
ROE 12.17973231 11.5064 11.7343
Liquidity Ratio: It is a class of financial metrics that indicates the ability of a company to pay off
its short-terms debts obligations (Bertoneche, 2001). The common liquidity ratios are quick ratio
current ratio.
Current Ratio= Current Assets
Current Liabilities∗100
Quick Ratio= Current Assets−Stock
Current Liabilities ∗100
2013 2012 2011
Current Assets 1342 1322 1138
Stock 781 759 638
Current Liabilities 2334 2303 2086
Current Ratio 0.574978578 0.57403 0.54554
Page | 2

Quick Ratio 0.240359897 0.24446 0.23969
Performance Ratio: This set of ratio indicates that how different aspects of a company’s finances
are performing. Some of the key performance ratios are fixed-assets turnover ratio and Return on
Assets.
Return on Assets for the past three years:
ROA= Net Income
T otal Assets∗100
2013 2012 2011
Net Income (£m) 637 621 636
Total Assets (£m) 10,527 9,859 9,149
ROA 6.05 7.00 6.91
Debt ratio for past three years:
Debt Ratio=Total Libilities
Total Assets
2013 2012 2011
Total Liabilities (£m) 5,297 4,462 3,729
Total Assets (£m) 10,527 9,859 9,149
DR 0.50 0.45 0.41
Efficiency Ratios: This set of ratios indicates the ability of the company to use its assets and
liability internally. Some common efficiency ratios are Assets turnover and sales to net working
capital (Hunjra, Shaheen, Niazi and Rehman, 2012).
Assets turnover ratio for past three years:
AssetsTurnover= Net Sales
Total Assets
2013 2012 2011
Net Sales (£m) 18816 17663 16479
Total Assets (£m) 10,527 9,859 9,149
ATR 1.720908141 1.791561 1.801180457
Page | 3

Working capital turnover ratio for Past three years:
Working capital turnove ratio= Sales
Working Capital
2013 2012 2011
Sales Revenue (£m) 18816 17663 16479
Working capital -992 -971 -948
Working capital turnover -18.2621 -18.0051 -17.3829
Table 1 Ratio Calculation
Ratios
2013 2012 2011
Profitability Gross Profit Margin 6.66 6.89 6.97
Net Profit Margin 3.52 3.52 3.86
Return on Equity
12.18 11.51 11.73
Liquidity Current Ratio 0.57 0.57 0.55
Quick Ratio 0.24 0.24 0.24
Performanc
e
Return on Assets
6.05 7.00 6.91
Debt Ratio 0.50 0.45 0.41
Efficiency Assets Turnover 1.72 1.79 1.80
Working capital
turnover
-18.26 -
18.00
-17.38
1.2 Evaluation and Recommendations
Ratio analysis is a single most important technique that converts the complex data into
easy to understandable ratios. By converting in ratios the figures can be easily analysed and
compared. The effectiveness of business performance varies with the changes in ratios. Ratios
indicate the ability of business to perform its activities as well paying of its liabilities and
Page | 4

utilizing its resources (Mao, 2012). The above ratios of Morrisons indicate its financial stability,
most of its ratios are indicating a positive sign but few of them indicating negative mark too.
Profitability Ratio: Most of the organization concerned with their profitability. Profitability ratios
are one of the most frequently used tools of ratio analysis. The above calculated profit margins
indicate the ability of firm to generate profit for its investors. These ratios identify the overall
performance and efficiency of the company. The gross profit margin and net profit margin
provides the firm's aptitude to convert sales into profits at various stages of dimension. Higher
the ratios better the performance (Neale and McElroy, 2004).
 Gross Profit Margin: This ratio is calculated by looking at cost of goods sold as a
percentage of sales. The GP ratios of Morrisons for past three year are, 6.66 for 2013,
6.89 for 2012 and 6.97 for 6.97. This figure indicates a fall in company’s gross profit that
is not a good sign for it. The larger the gross profit margin, the better for the firm.
Company should focus on increasing its gross profit. IT is not an exact estimate of the
company's pricing strategy but it provides a good indication of financial health. Company
should maintain an adequate gross profit margin without it the company will not be able
to pay its operating and other expenses. The stability in its GP margin is a positive
indication for the company.
 Net Profit Margin: It indicates the percentage of profit after paying all expenses. It is one
of the most often ratio that is used for calculating the net income after deducting all
expenses. It indicates how much profit the company made for every £1 it generates in
sales. A higher ratio indicates the greater performance. Morrisons’s net profit margin for
2013 is 3.52, for 2012, 3.52 and for 2011 is 3.86. As like its gross profit company’s net
profit is also decreasing. Company should focus on increasing its overall revenue and
decrease its administrative expenses.
 Return on Equity: ROE measures the profit generated by company in relation to its
shareholders investments. Morrisons’s ROE for past three years are: for 2013 – 12-18, for
2012 – 11.51 and for 2011 – 11.73. Increasing figure of ROE for 2013 is a improved sign
for the company.
Liquidity Ratios: Liquidity ratios indicate the ability of company to pay off its immediate debts.
In order to fulfil its financial requirements a company takes the help of debts. But every time the
Page | 5

company should have enough liquid assets to pay off its immediate debts (Sangster, 2006). It
includes all the current liabilities that need to be paid within one year.
 Current Ratio: current ratio indicates the capability of company to pay off its current
liabilities from current assets. Current assets can produce fast cash to the company that
can be paid for the current liabilities. A ratio of 1:1 is the ideal position of current ratio,
where company can pay off all its current liabilities with its current assets. Morrisons
current ratio for 2013 is 0.57, for 2012, 0.57 and for 2011 is 0.55. This ratio indicates the
negative liquid position of the company. The current ratio of Morrisons indicates that
company does not have enough liquid assets to pay off its immediate liabilities. So
company should increase its current assets or on the other hand it can focus on decreasing
the current liabilities.
 Quick Ratio: it is also called acid test ratio. This ratio also indicates the liquid financial
position of the company but it does not include stock in its immediate assets. While
calculating the current ratio stock is also countered as a liquid asset but stock requires the
long time for converting into cash (Leigh, 2008). So while calculating the quick ratio
stock is not treated as a liquid asset. Morrisos has quick ratio of 0.24 for past three years.
There is no change in company’s quick ratio in past three years. But the difference in
current and quick ratio indicates that the stock is a big part of company’s overall
liquidity. In order to improve its liquid position company should decrease the current
liabilities. Company can reduce its creditors for this purpose.
Performance Ratios: This set of financial ratios indicts the performance of the company in
different aspects of finance. Such as, it’s return on assets and fixed assets turnover. Both these
ratios indicate the efficiency of firm to generate revenue through its assets (Atrill, 2009).
 Return on Assets: this ratio identifies the profitability of the company relative to its total
assets. Morrisons has the ROA of 6.05 for 2013, 7.00 for 2012 and 6.91 for 2011. The
higher figure of ROA indicates the better performance of company. The performance of
Morrisons was much better in 2012 compared to 2013 and 11. Company should use its
assets more effectively for improved ROA figure. Company is not making enough money
compared to investment so management should make wise choices in allocating its
resources.
Page | 6

 Debt Ratio: this ratio indicates the availability of debt assets. A debt ratio of less than 1
indicates that a company has more assets than debt; on the other hand, a debt ratio of less
than 1 indicates that a company has more debt than assets (Yescombe, 2002). The debt
ratio of Morrisons for past three years is 2013 - 0.50, 2012 - 0.45, 2011 - 0.41. The yearly
increasing figure indicates that company is focusing on raising its assets and reducing its
debts. By doing so company will have the option to arrange finance from debts when
required in future.
Efficiency Ratios: this set of ratios indicates the efficiency of company to use its assets and
liabilities internally.
 Assets turnover Ratio: This ratio measures that how many £ of sales a company generates
from each £1 of asserts employed. The higher figure of assets turnover the better the
company is performing. Morrisons’s Assets turnover ratios for past three year are: 1.72
for 2013, 1.79 for 2012 and 1.80 for 2011. Company is getting stabile revenue from its
total assets; management should focus of taking the more effective use of assets.
 Working capital Turnover ratio: This ratio is a measurement of comparing the use of
working capital to generation of sales revenue. Morrisons’s working capital turnover
ratios for past three years are: for 2013 it is -18.26, for 2012 it is -18.01 and for 2011 it is
-17.38. This figure indicates negative symptom for Morrisons. Company’s working
capital need to increased otherwise it will face financial problems in short term.
1.3 Summarised Report:
Table 2 Summarised Report of Ratio Analysis
Ratios 2013 2012 2011 Remark
Profitability
Gross Profit Margin 6.66 % 6.89 % 6.97 % Yearly decreasing, need to increase revenue.
Net Profit Margin
3.52 % 3.52% 3.86 %
Decreeing as like GPM, need to reduce the
operating expenses
Return on Equity 12.18 % 11.51% 11.73% Better than previous year but still need the
improvement by increasing profits.
Liquidity
Page | 7

Current Ratio
0.57 % 0.57 % 0.55 %
Company need to increase its current assets or
decrease current liabilities
Quick Ratio
0.24 % 0.24 % 0.24 %
Stock holding a big part of total liquid assets,
company need to reduce its creditors.
Performance
Return on Assets 6.05 % 7 % 6.91 % Company need to take effective use of resources.
Debt Ratio 0.5 0.45 0.41 Debt is less so required fund can be arranged from
debts.
Efficiency
Assets Turnover
1.72 1.79 1.8
Debasing, company need to take moiré effective
use of its resources.
Working capital turnover -18.26 -18 -17.38 High risk of facing financial troubles in short term.
Current assets need to be increased
PART 2
Making an investment is a key financial decision and requires the analysis of various
aspects. There are many factors that determine the selection of a particular investment project.
Risk, return and time are most important among them (Volitich, 2008). Risk indicates the
chances of profit and loss. The chances of profit and loss indicate the risk involved with any
investment. Return can be stated as the expectations of an investor from an investment. Expect
and actual are two different types of return. Expected return can be based on the prediction or
analysis but actual return is based on the performance of project. Time represents the length of
time which is required in order to recover the cost of investment (Mclaney, 2006).
There are several methods to identify the attractiveness of any investment project. This
part of the report includes the study of financial tools that are used in order to identify this
attractiveness. In present case there are two different investment proposals with their different
outlay and inflows. The in-depth analysis of both these projects will determine that which project
should be selected for making an investment.
Projects
Project Project1 Project 2
Page | 8

£000 £000
Initial outlay (1,100) (800)
Inflow/Profit (Loss)
1st Year (110) (20)
2nd Year 200 140
3rd Year 400 250
4th Year 500 300
5th Year 520 380
Residual Value 150 80
Rate on Return on investments: 10%
2.1 Assessing the viability of the competing investment projects
A: Net Present Value Method
NPV of project 1
Table 3 Calculation of NPV for Project 1
Year
Project 1
(£000)
PV Factor @
10% Present Value of 1
1st Year -110 0.909 -99.99
2nd Year 200 0.826 165.2
3rd Year 400 0.751 300.4
4th Year 500 0.682 341
5th Year 520 0.621 322.92
Residual Value 150 0.621 93.15
1122.68
Net Present Value=Present Value−Initial Investment
Net Present Valueof Project 1=1122.68−1100
NPV of Project 1=£ 22680
NPV of project 2
Table 4 Calculation of NPV for Project 2
Year
Project 2
(£000)
PV Factor @
10% Present Value of 2
1st Year -20 0.909 -18.18
2nd Year 140 0.826 115.64
3rd Year 250 0.751 187.75
4th Year 300 0.682 204.6
Page | 9

5th Year 380 0.621 235.98
Residual Value 80 0.621 49.68
775.47
Net Present Valueof Project 2=775.47−800
NPV of Project 2=£−24530
As the project 1 is showing the positive net present value, the company PLC Plc. Should invest
in project 1.
B: Internal Rate of Return Method
As the calculation of NPV of both the projects indicates that project 1 is coming positive
and project 2 is coming negative. On the basis of NPV calculation it can be stated that IRR of
project 1will be above 10% on the other hand IRR for project 2 will be below 10%. On the basis
of hit and trial method, the NPV of 1 will be calculated at 11%.
Table 5 Calculation of IRR for Project 1
Year
Project 1
(£000)
PV Factor
@ 11%
Present
Value of 1
1st Year -110 0.901 -99.11
2nd Year 200 0.812 162.4
3rd Year 400 0.731 292.4
4th Year 500 0.659 329.5
5th Year 520 0.593 308.36
Residual Value 150 0.593 88.95
1082.5
NPV of Project 1=1082.5−1100
NPV of project 1=£−17500
The above table indicates that the IRR of project 1 will be in between 10% and 11%.
IRR of project 1:
IRR=10+ 1122.68−1100
1122.68−1082.5∗1
IRR=10.56 %
On the basis of hit and trial method NPV for project 2 will be calculated @ 9%.
Table 6 Calculation of IRR for Project 2
Page | 10

Year
Project 2
(£000)
PV Factor
@ 9%
Present
Value of 2
1st Year -20 0.917 -18.34
2nd Year 140 0.842 117.88
3rd Year 250 0.772 193
4th Year 300 0.708 212.4
5th Year 380 0.65 247
Residual Value 80 0.65 52
803.94
NPV of Project 2=803.94−800
NPV of Project 2=£ 3940
This above table indicates that IRR of project 2 will be between 9% and 10%.
IRR of project 2:
IRR=9+ 803.94−800
803.94−775.47∗1
IRR=9.14 %
On the basis of above calculation the company PLC plc should invest in Project 1 because the
IRR of Project 1 is more than 10% and IRR of Project 2 is less than 10%.
C: Average Rate of Return
Average rate of return of project 1:
Average rate of Return= Average Annual Profits after Taxes
Average Investment
the life of the project
∗100
Average Annual Profit after Tax=−110+200+ 400+500+520
5
Average Annual Profit after Tax=£ 332000
Average Investment=Salvage Value+ 1
2 (Cost of Machine−Salvage Value)
Average Investment=150+ 1
2 (1100−150 )
Average Investment=£ 625000
Average rate of return= 332000
625000∗100
Average rate of return=53.12 %
Page | 11

Average rate of return of project 2:
Average Annual Profit after Tax=−20+140+250+300+380
5
Average Annual Profit after Tax=£ 226000
Average Investment=80+1
2 ( 800−80 )
Average Investment=£ 440000
Average rate of return= 226000
440000∗100
Average rate of return=51.36 %
The above calculation indicates that average rate of return of Project 1 is higher than project 2 so
PLC plc should invest in Project 1.
2.2: Payback Period Method
Payback Period for project 1:
Table 7 Calculation of Payback Period for Project 1
Year
Project 1
(£000)
Cumulative
(£000)
Year 1 -110 -110
Year 2 200 90
Year 3 400 490
Year 4 500 990
Year 5 520 1510
Residual
Value 150
This above calculation of payback period indicates that the cost of investment in Project 1
will be recovered between 4th and 5th year. The exact period of recovery will be four years and
two and a half months.
1100−990
520 ∗12=2.53
Payback Period for project 2:
Table 8 Calculation of Payback Period for Project 2
Year Project 2 Cumulative
Page | 12

(£000) (£000)
1st Year -20 -20
2nd Year 140 120
3rd Year 250 370
4th Year 300 670
5th Year 380 1050
Residual
Value 80
This above table shows that the cost of investment in project 2 will also be recovered
during 5th year. The exact payback period for this project will be 4 years and four months.
800−670
380 ∗12=4.11
As the payback of period of Project 1 is shorter than Project 2, so PLC plc should invest
in Project 1.
2.3 Advantages and Disadvantages
Net Present Value: This method compares the value of money today and the value of same
money in the future, taking returns and inflation into account. The positive NPV for a project
determines its acceptability. But if the NPV is negative then the project should be rejected
(Elliott, Elliott and Elliot, 2007).
Advantages:
 The Importance is given to time value of money.
 While calculating the NPV, consideration to both before and after cash flow is given.
 High priority is given to profitability and risk of the project.
 The value of firm can be maximised by the help of NPV.
Disadvantages:
 This method is difficult to use.
 If the amount of investment of mutually exclusive projects is not equal then this method
cannot give accurate decision.
 If the projects are of unequal life then NPV may not give correct decision.
Page | 13

Internal Rate of Return: can be taken as the rate of growth that is expected from a project to
generate. It identifies the rate of return at which the NPV of a project become zero. It makes the
sum of all cash flows zero so that projects can be compared (Phillips, 2000).
Advantages:
 This method takes the perfect use of time value of money.
 Equal importance is given to all cash flows.
 No need of any hurdle rate or required rate of return.
 Maximum profitable project can be identified by using IRR.
Disadvantages:
 Unrealistic assumption of reinvesting the profits at same IRR.
 This method ignores the economies of scale.
 If the combination of positive and negative future cash flows the calculation reaches to
the trap of multiple IRR.
 While comparing two mutually exclusive investment projects this method is less helpful.
Accounting Rate of Return: This is a straight-line method for gathering the quantitative
information (Drury, 2006). This is the rate which an individual expect from an investment. In
order to get this expected rate this method divides the average profit by the initial investment. By
using this method an investor can easily compare the profit potential for investment projects. The
project should be accepted if the ARR is greater than or equals to a hurdle rate.
Advantages:
 This method is easy to use and communicate.
 It provides a guide to identify the attractiveness of an investment.
 It measures the profitability of investment as this method is based on accounting profit.
Disadvantages:
 This method ignores the time value of money.
 No consideration is given to terminal value of the project.
 It ignores the cash flow from the investment.
Payback Period: payback period indicates the length of time which is required to recover the
cost of an investment. If all other things remain equal, the acceptability of a project is determined
Page | 14

by its payback period, shorter the period, higher the chances of acceptability (Atrill and
McLaney, 2009).
Advantages:
 It is a universally used and easy to understand method.
 It gives more importance liquidity of the investments.
 It determines the risk inherent in a project.
Disadvantages:
 This method also does not take time value of money into account.
 This method ignores the profitability while giving high emphasis to payback period.
 The consideration is given to only cash flow before payback period.
Widely used appraisal methods:
Payback period: it is one of the most widely used techniques of investment appraisal. It is widely
used due to its accurate calculation of time length. This method is easy to use and provides the
exact time frame of recovering the cost of investment. This method is conceptually simple and
easy to calculate. It is mostly use because it is a seriously flawed method of evaluating
investments (Sangster, 2006).
Net Present Value: This is another widely used method of investment appraisal. This method is
used because of recognizing the time value of money. The value of money changes with time
due to inflation and changing interest rates. So while making any investment, an investor always
calculates the present value of its future returns. By analysing the net present value of future
returns investor can identify that in which project he should invest. Inventor should invest only
when the NPV of future return is higher than initial investment (Hunjra, Shaheen, Niazi and
Rehman, 2012).
2.4 Summarised Report
Table 9 Summarised Report
NPV IRR Payback Period ARR
Project 1
£22680 10.56%
4 Years and 2
months 53.12%
Project 2
£-24530 9.14%
4 years and 4
months 51.36%
Page | 15

This above summarised report includes the results found by all the analysis. These results
indicate that PLC plc should invest in project 1 because it is better than Project 2 in all aspects.
Project 1 has better NPV, shorter payback period, better ARR and IRR that indicates the greater
attractiveness of this project compared to project 2.
CONCLUSION
After analysing both two cases, it can be concluded that financial management plays an
essential role in business performance. Using the various tools of financial management, the
fiscal performance of the company can be assessed and important information can be collected
for investment decision. Ratio analysis provides the comprehensive understanding of company’s
financial performance that leads to greater investment decisions. On the other hand various
investment appraisal methods help in knowing the effectiveness and attractiveness of different
investment projects and choosing the right one.
Page | 16

References
Books and Journals
Arnold, G. 2005. Corporate Financial Management, 3rd Ed. Prentice Hall.
Atrill, P. 2009. Financial Management for Decision Makers, 5th Ed. Prentice Hall.
Atrill, P. and McLaney, E. 2009. Accounting and Finance for Non-Specialists, 6th Ed. Prentice
Hall.
Bertoneche, M., 2001. 2 – Review of financial statements 2: The income statement and the
statement of cash flows. Financial Performance. 46-73.
Collier, P.M. 2012. Accounting for Managers, 4th Ed. Wiley.
Drury, C. 2006. Management and Cost Accounting, 7th Ed. South Western Cengage learning.
Hunjra, A.I., Shaheen, I.B., Niazi, G.S.K. and Rehman, I. 2012. Investment Appraisal
Techniques and Constraints on Capital Investment. Actual Problems of Economics. 2(4).
Mao, J.C.T., 2012. Survey Of Capital Budgeting: Theory And Practice. The Journal of Finance.
25(2). pp.349-360.
Mclaney, E.I. 2006. Business Finance Theory and Practice, 7th Ed. Prentice Hall.
Neale, B. and McElroy, T. 2004. Business Finance- A Value Based Approach. Prentice Hall.
Phillips, P.A., 2000. The strategic planning/finance interface: does sophistication really matter?
Management Decision. 38(8). pp.541-549.
Sangster, A. 2006. Capital investment appraisal techniques: a survey of current usage. Journal of
Business finance and Accounting. 20(3). PP. 307-332.
Elliott, B., Elliott, J., and Elliot, J., 2007. Financial Accounting and Reporting, 12th ed. USA.
Volitich, 2008. IBM Cognos 8: Business Intelligence. Hill Edition.
Leigh, E., 2008. Managing Financial Resources. The Stationery Office.
Yescombe, E.R., 2002. Principle of Project Finance. Illustrated.
Online
Financial Times. 2013. [Online]. Available through:
<http://markets.ft.com/research/Markets/Tearsheets/Financials?
s=MRW:LSE&subview=BalanceSheet>. [Accessed on 8th April, 2013].
Morrisons. 2013. [Online]. Available through: < http://www.morrisons.co.uk/>. [Accessed on 8th
April, 2013].
Page | 17

APPENDIX
Balance sheet of Wm Morrison Supermarket Plc.
ASSETS
2013 2012 2011
Cash And Short Term Investments 270 241 228
Total Receivables, Net 291 237 215
Total Inventory 781 759 638
Prepaid expenses -- 83 53
Other current assets, total -- 2 4
Total current assets 1,342 1,322 1,138
Property, plant & equipment, net 8,616 8,202 7,786
Goodwill, net 415 34 7
Intangibles, net -- 269 177
Long term investments 154 31 0
Note receivable - long term -- -- --
Other long term assets 0 1 3
Total assets 10,527 9,859 9,149
LIABILITIES
Accounts payable 2,130 1,409 1,400
Accrued expenses -- 473 387
Notes payable/short-term debt 55 109 0
Current portion long-term debt/capital leases -- -- 0
Other current liabilities, total 149 312 299
Total current liabilities 2,334 2,303 2,086
Total long term debt 2,396 1,588 1,052
Total debt 2,451 1,697 1,052
Deferred income tax 471 464 499
Minority interest -- -- --
Other liabilities, total 96 107 92
Total liabilities 5,297 4,462 3,729
SHAREHOLDERS EQUITY
Common stock 235 253 266
Additional paid-in capital 107 107 107
Retained earnings (accumulated deficit) 4,888 5,049 5,042
Treasury stock - common -- -- --
Unrealized gain (loss) -- -- --
Other equity, total -- -12 5
Total equity 5,230 5,397 5,420
Total liabilities & shareholders' equity 10,527 9,859 9,149
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Total common shares outstanding 2,347 2,532 2,658
Treasury shares - common primary issue 2.77 0 0
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