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Business Research & Decision Making- Morrison PLC

   

Added on  2020-02-03

11 Pages1795 Words56 Views
BUSINESS RESEARCH AND DECISION MAKING1

Table of ContentsIntroduction......................................................................................................................................3Calculating following ratios for 2 Companies for 2 years:..............................................................3Profitability ratios............................................................................................................................3Liquidity ratios:...............................................................................................................................4Working capital ratios:....................................................................................................................5Cash flow statement:........................................................................................................................6Conclusion.....................................................................................................................................10References......................................................................................................................................112

IntroductionThe two concerning companies that are considered for computing the profitability ratios areMorrison PLC and Marks and Spencer PLC. Different ratios are to be calculated in order tocheck for the financial growth of the company in two years. Considering, 2009 and 2010, thegrowth and development of the company is being analysed in the study. Calculating following ratios for 2 Companies for 2 years:Profitability ratiosIn the viewpoints of Arkan (2016, p.20), profitability ratios are considered to be the class offinancial metrics which are used to assess the ability of any business company to generateearnings as compared to the expenses as well as other relevant costs that are incurred during anydefinite period of time. The profitability ratios that are computed for both the companies Marksand Spencer PLC as well as Morrison PLC are- profit margin ratio, assets turnover ratio andreturn on assets ratio. As per the observations of Goldmann (2017, p.110), profitability ratioseven compare the accounts under income statement as well as the categories for identifying theabilities of the company to reap profits out of the company operations. Marks and Spencer PLCFor 2009Profit margin ratio = Net income/net sales = 506.8/9062.1 = 0.055Assets turnover ratio = Revenue/net assets = 9062.1/2100.6 = 4.314Return on assets ratio = Net income/total assets = 506.8/7153.2 = 0.070For 2010Profit margin ratio = Net income/net sales = 523/9536.6 = 0.054Assets turnover ratio = Revenue/net assets = 9536.6/2185.9 = 4.36Return on assets ratio = Net income/total assets = 523/7258.1 = 0.072Morrison PLCFor 2009Profit margin ratio = Net income/net sales = 402/ 14528 = 0.027Assets turnover ratio = Revenue/net assets 14528/4520 = 3.214Return on assets ratio = Net income/total assets = 402/(7160 + 1066) = 0.0483

For 2010Profit margin ratio = Net income/net sales = 537/15,410 = 0.034Assets turnover ratio = Revenue/net assets =15,410/4949 = 3.11Return on assets ratio = Net income/total assets = 537/ (7666 + 1094) = 537/8760 = 0.061Analysis: According to the computations, considering two consecutive two years of data 2009and 2010, it could be concluded that both the companies encountered an increase in theircapability to reap or generate profits throughout the years. The exceptional case has been theassets turnover ratio, for Morrison PLC, which has reduced over years since the amount of assetshave increased. Liquidity ratios:In words of Zentes et al. (2017, p.445), liquidity ratios help in measuring any company’s abilityto repay the debt obligations as well as the margin of safety by computation of metrics involvingcurrent ratio, operating cash flow ratio and quick ratio. Here, while computing ten liquidity ratioof the companies, the current liabilities are assessed in the context of the amount of liquid assetsthat are required to evaluate coverage of the debts of short-term during any emergency.According to the suggestions of Özşuca and Akbostancı (2016, p.600), mortgage originators aswell as bankruptcy analysts utilise liquidity ratios for evaluating on-going concern issues sincemeasurement of liquidity ratio indicates positioning of cash flow. Marks and Spencer PLCFor 2009Current ratio = Current assets/current liabilities = 1389.8/2306.9 = 0.60Quick ratio= current assets - liabilities/ current liabilities = 1389.8-2850.6/2306.9 = -0.63For 2010Current ratio = Current assets/current liabilities = 1520.2/1890.5 = 0.80Quick ratio= current assets - liabilities/ current liabilities = 1520.2-3076.8/1890.5 = -0.82Morrison PLCFor 2009Current ratio = Current assets/current liabilities = 1066/2024 = 0.52Quick ratio= current assets - liabilities/ current liabilities = (1066-1682)/2024 = -0.30For 20104

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