Financial Analysis of Balfour Beatty PLC and Interserve PLC | Report

Running head: FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND
INTERSERVE PLC
FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC
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FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC2
Executive summary
The primary aim of this study is to analyse the financial condition of Balfour Beatty Plc and
Interserve Plc through detailed ratio analysis, which includes liquidity, profitability, activity,
debt, and market value ratios. From the study, it can be observed that the financial condition
of Balfour Beatty is better than Interserve Plc. The notable impact of ratio in financial
analysis can be perceived from the study. The SMART and SWOT analysis facilitated the
management to understand the strategies of the organisations along with their weaknesses.
From the study, it has been found that Interserve Plc is in poor financial condition, and
therefore it is recommended that MFI should divest the shares of Interserve Plc.

FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC3
Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
Financial Analysis......................................................................................................................5
Ratio analysis.............................................................................................................................5
Liquidity ratio.........................................................................................................................5
Activity ratio..........................................................................................................................5
Debt ratio....................................................................................................................................6
Profitability ratio........................................................................................................................6
Gross profit margin................................................................................................................6
Return on assets......................................................................................................................6
Return on equity.....................................................................................................................6
Market ratios..............................................................................................................................7
Book value per share..............................................................................................................7
Dividend yield........................................................................................................................7
Earnings per share..................................................................................................................7
Price/earnings ratio.................................................................................................................7
Ethical analysis...........................................................................................................................7
SMART analysis........................................................................................................................8
Balfour Beatty Plc..................................................................................................................8
Interserve Plc..........................................................................................................................8
SWOT Analysis.....................................................................................................................9

FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC4
Balfour Beatty Plc................................................................................................................10
Interserve Plc........................................................................................................................10
Advice to MFI Ltd...................................................................................................................11
Recommendations....................................................................................................................12
Appendix..................................................................................................................................13
Reflective report.......................................................................................................................14
References................................................................................................................................18

FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC5
Introduction
This case study will analyse the financial condition of Balfour Beatty Plc and
Interserve Plc by using different financial ratio analysis. The financial advisor of MFI will
evaluate the financial statement to observe the financial condition of both of the companies.
The financial statements of 2017 and 2018 will be used to evaluate the ratios of these
companies, which will aid to identify the financial performance of the company during the
year. The ethical analysis will also be done based on financial and other reports. The analysis
will advise the investment committee about which company’s shares should they divest.

FINANCIAL ANALYSIS OF BALFOUR BEATTY PLC AND INTERSERVE PLC6
Financial Analysis
The following financial analysis will aid to recognize the financial situation of these
companies. The ratio analysis is given below, which will aid to understand the financial
position of both of the firm and help the directors in decision-making (Andjielic and Vesic
2017).
Ratio analysis
The ratio analysis will assist the board of directors by providing a clear picture of their
business and operations (Jamaluddin, Husin and Omar 2018). Liquidity, activity, debt,
profitability and market ratios will be evaluated below, which will help the management to
evaluate the financial position of these companies (Dyson and Franklin 2017). Along with the
annual reports, the balance sheet, income statements and statement of cash flows will be used
to evaluate these ratios.
Liquidity ratio
The liquidity ratio helps the firm to estimate its ability to pay off short term
obligations without increasing its external capitals (Sari, Nurlaela and Titisari 2018). The
common liquidity ratios are current and quick ratios.
Current ratio
Current ratio assists the business to evaluate its liquidity. The investors can measure
how a company can maximize its assets to satisfy their debts and other payables by assessing
the information of current ratio (Singh 2017). Current ratio helps the management to
understand the overall financial health of a company.
Quick ratio