Comparing and Analyzing Financial Statements

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Comparison Of TwoLondon Stock ExchangeCompanies1
Table of ContentsINTRODUCTION...........................................................................................................................3TASK...............................................................................................................................................31. Overview of Companies:........................................................................................................32. Analysis:..................................................................................................................................43. Performance Factors:...............................................................................................................8CONCLUSION................................................................................................................................9REFERENCES............................................................................................................................10APPENDICES...............................................................................................................................122
INTRODUCTIONA Listed company refers to company whose share are trading on an authorised or officialstock exchange. Financial comparison between two or more listed companies are required to takesignifiant investment decisions. Such comparative analysis is vital to choose best appropriatecompany out of several alternatives (Edwards, 2013). Comparison is done by covering variousfinancial aspects like accounting ratios, views of company's shareholders to evaluate financialperformance and financial position of different companies. This report describes a financialcomparison of two listed companies: The Go-Ahead Group Plc and Barratt Developments Plc.Both these companies are belongs to different sectors but listed on same stock exchange. Thisreport also covers discussion on financial and non-financial factors that may affect thesecompanies' performance.TASK1. Overview of Companies:The GO-Ahead Group Plc belongs to Travel & Leisure service sector and provider ofpassenger transport in United Kingdom. Company provides transportation services through threesegments: Local Bus services, London Bus services and Rail. Company is also engaged inoffering rail replacements and other contracts based services. Company's bus segment providesderegulated services in North East, south east, southern England and regulated services inLondon.Barratt Developments Plc is UK's one of the leading residential property developmentcompany and operating its business through approx 30 Divisions. Company is engaged inpurchase or acquisition of lands, accessing planning consents and construction of rich qualityhomes. Company builds and constructs rich quality homes as per criteria of rating of HBF fivestar. Company's key operation is construction of residential house and commercial buildings inUK.2. Analysis:Generally financial analytical tool is use by business organisations for analysis of variousfinancial and non-financial aspects. Most popular and widely used tool for financial analysis isRatio analysis (Fourie, 2015). It is a systematic formula based financial analytical tool in whichvarious ratios are calculated by business organisation to measure liquidity position, profitability3
condition, leverage of firm etc. These accounting ratios are calculated by using data of annualreport and financial statements. Ratio analysis provides a comparison of performance ofcompany in related industry and helps to determine year to year performance of company. Ratioanalysis also provide a framework for comparison of two or more companies concerned withdifferent-different industries. As Go-Ahead Group Plc and Barratt Developments Plc are twodifferent sector companies but through ratio analysis shareholder can evaluate companies'performance and take decision regarding purchase or sell of securities. Accounting ratios arefurther classified as: Liquidity ratios, Asset Turnover ratios, Financial Leverage ratios,Profitability ratios and Dividend policy ratio. Following are various accounting ratios for threeyears of selected companies, as follows:I. Liquidity Ratios:It refers to accounting ratios that points out towards a business organisation'ability to pay its current liabilities or obligations. These ratios helps to describes liquidityposition of company.Following are the major liquidity ratio:a. Current ratio:Current RatioThe Go-Ahead Group PlcBarratt Developments Plc2018201720162018201720161.090.851.063.73.253.3It is a kind of liquidity ratio that helps to measure company's ability and efficiency to payout its current liabilities or short term obligations. 2 : 1 is considered as ideal current ratio. Fromabove current ratio table it is clear that Barratt Development has current ratio above the idealratio which are 3.7,3.25 and 3.3 in year 2018,2017 and 2016 respectively. Current ratio aboveideal ratio indicates that desirable situation is achieved. Where as current ratio of Go-AheadGroup Plc is below the ideal ratio which are 1.09,085 and 1.06 in year 2018,2017 and 2016respectively. Current ratio below the ideal ratio indicates that company is not able to generatecurrent assets to pay its current obligation.b. Quick Ratio:Quick RatioThe Go-Ahead Group PlcBarratt Developments Plc2018201720162018201720160.880.740.950.780.590.574
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