Business Accounting and Finance for Managers: Analyzing Performance and Investment Appraisal in the UK Gambling Industry

AS 1 - BUSINESS ACCOUNTING AND FINANCE FOR MANAGERS
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Table of Contents
Introduction................................................................................................................................3
Section A – Question 1..............................................................................................................4
(a) Selection and justification of at least 10 financial ratios and calculate 2 non-financial
ratios to analyse the performance and financial position of the three companies......................4
(b) Identification of the best performing company in the industry..........................................11
(c) Identification of the most poorly performing company in the industry..............................12
Section B – Question 2.............................................................................................................13
(a) Identify and explain the key stages in the capital investment decision-making process, and
the role of investment appraisal in this process.......................................................................14
(b) Identify and explain the main methods of investment appraisal used in practice (including
DCF), use numerical examples to help illustrate the key aspects............................................15
Conclusion................................................................................................................................17
Reference list............................................................................................................................18
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Introduction
Measurement and analysis of performance is important for every industry. There are different
tools that can be used by an industry in order to measure and control its performance. Ratio
analysis is one such tool that helps in measuring the performance of a company or an
industry. This report evaluates the performance of the three big companies in the gambling
industry in UK, which are Paddy Power Betfair Plc, William Hill Plc and Ladbrokes Coral
Group Plc. This industry is one of the key players that contribute a major portion of the
revenue of the UK economy. The report also contains the evaluation of the importance of
investment appraisal in order make decisions such as capital investment. It also discusses
about the investment appraisal techniques that can be used in a company.
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Section A – Question 1
(a) Selection and justification of at least 10 financial ratios and calculate 2 non-financial
ratios to analyse the performance and financial position of the three companies
Ratio analysis is one of the most effectual performance metrics, which can be used by a
business for accurately measuring the performance of a company. This metric not only helps
a company in measuring its own performance but also facilitates it to measure and compare
its performance with other companies in the marketplace (Uechi et al., 2015). The
performance of the three best companies in the gambling industry operating in UK has been
done below using both financial as well as non-financial ratios. The comparison is as follows
–
Comparison of profitability ratios –
Companies WILLIAM HILL LADBROKES CORAL
GROUP
PADDY POWER
BETFAIR
Year 2014 2015 2016 2014 2015 2016 2014 2015 2016
Profit
margin (%)
14.45 11.55 11.20 3.21 - 3.60 - 14.15 18.89 15.67 0.79
ROCE
using Net
income
(%)
12.69 13.72 10.51 7.38 3.79 - 6.80 36.52 54.66 - 0.02
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