Financial Performance and Investment Appraisal of Persimmon Plc

FINANCE AND
ACCOUNTING

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
Financial performance of the company using ratio analysis.......................................................1
Appraisal of possible investment and sources of finance............................................................4
Cost analysis of present and proposed products..........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUTION
Financial accounting refers to the specific branch of accounting that involves recording,
summarizing as well as reporting the transactions that result from the business operations over
period of time. The transactions of business are summarised in preparation of the financial
statements such as income statement, balance sheet and the cash flow statement (Loughran and
McDonald, 2016). They reflect the operating performance of company. Present report is based
on Persimmon Plc which is a leading house building company of United Kingdom. Present
report will be providing about the financial performance of the company, investment appraisal
techniques with sources of finance. It will also provide about the cost analysis of product using
different costing techniques with the recommendations on planned and current products.
Financial performance of the company using ratio analysis
Persimmon plc
2019 2018 Change
Liquidity ratio
Current assets 5150 2232
Current liability 3773 1676
Inventory 1101 671
Quick Assets 4049 1561 61%
Current ratio
Current assets /
current liabilities 1.36 1.33 2%
Quick Ratio
(Current Assets -
Inventory) / Cur-
rent Liabilities 1.07 0.93 13%
Profitability ratio
Employed Capital 24309 22474
Net operating profit 4544 1188
Return on capital em-
ployed
Net operating
profit/Employed
Capital 18.69% 5.29% 72%
Net Income 4544 1188
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Shareholder's Equity 15098 13150
Return on Equity
Net Income /
Shareholder's Eq-
uity 30.10% 9.03% 70%
Cost of Sales 5605 4959
Sales 14206 9167
Gross Margin
Total Sales –
COGS/Total Sales 60.54% 45.90% 24%
Net profit 4544 1188
Sales 14206 9167
Net profit ratio
Operating Income/
Net Sales 31.99% 12.96% 59%
Efficiency Ratios
Inventory 1101 671
Trade Receivables 1258 120
Net Assets 15098 13150
Cost of Sales 5605 4959
Sales 14206 9167
Asset turnover ratio Sales / Net assets 0.94 0.70 26%
Inventory turnover ratio Sales / Inventory 5.09 7.39 -45%
Account receivable
turnover ratio
Sales / Accounts
Receivable 11.29 76.39 -576%
Debt
Debt 9211 9324
Equity 15098 13150
Debt equity ratio Debt/ Equity 61.01% 70.90% -16%
Ratio analysis is the tool used by users of the financial statements for assessing the financial
performance of the company. Financial performance of Persimmon Plc is assessed for the year
2018 and 2019.
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