Financial Accounting and Reporting: Analysis of Next PLC's Financial Information and Recommendations

Running head: FINANCIAL ACCOUNTING AND REPORTING
Financial Accounting and Reporting
Name of the Student
Name of the University
Author’s Note

1FINANCIAL ACCOUNTING AND REPORTING
Executive Summary
The objective of the first part of the report is the analysis of the merits and demerits of Limited
Liability Company (LLC) as compared to the other forms of business like sole proprietorship or
partnership. The next part of the report involves in the analysis of four types of ratios with the
help of the financial information of Next PLC; they are profitability ratios, liquidity ratios,
investor ratios and working capital ratios. Based on the results of the ratio analysis, some specific
recommendations are provided to the management of Next PLC to revive their financial issues.

2FINANCIAL ACCOUNTING AND REPORTING
Table of Contents
Introduction......................................................................................................................................3
Merits and Demerits of LLC in Comparison to Other Form of Business.......................................3
Merits...........................................................................................................................................3
Demerits.......................................................................................................................................4
Analysis of Ratios............................................................................................................................4
Profitability Ratios.......................................................................................................................4
Liquidity Ratios...........................................................................................................................6
Investors Ratios...........................................................................................................................7
Working Capital Ratios...............................................................................................................9
Future of Next PLC in UK Clothing Retail Industry.....................................................................10
Recommendations..........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

3FINANCIAL ACCOUNTING AND REPORTING
Introduction
Financial Accounting can be regarded as a specialized accounting process that helps in
keeping track of the financial transactions of the companies. After that, with the help of various
accounting principles and standards, accountants record and summarize the transactions so that
they can be presented in the form of financial reports (Bevis 2013). The main aim of this report
is the analysis of the financial information of Next PLC with the help of relevant ratios. Thus,
this report provides the scope for the analysis and interpretation of the financial statements of the
companies. This report also sheds light on both the merits and demerits of Limited Liability
Companies (LLC) in comparison to the other form of businesses.
Merits and Demerits of LLC in Comparison to Other Form of Business
Merits
Proprietors Do Not Have Any Responsibility Towards Company Debts: It can be considered as
the most crucial characteristic of an LLC. The proprietors of a partnership or sole partnership
business are responsible for the debt of the business. In case the assets of a sole partnership or
partnership businesses are not enough to fulfill the obligations of the creditors, they can go after
the personal bank account, house and others of the proprietors to get their money back. However,
in case of an LLC, the owners do not have any liability in case the businesses run out of funds
(Lewis 2013).
It Is Easier for an LLC to Raise Money: An LLC can raise capital from many sources. It has the
option to admit new member by selling interests of membership. After that, it can create new
class of membership interests with the help of different voting or profit characteristics. The main