FINANCIAL ANALYSIS OF CHAPEL DOWN

Running Head: FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHOR NOTE

Running Head: FINANCIAL ANALYSIS
Executive summary
The report is related to the company listed in the UK London stock exchange. Therefore
the company chosen for the report is the Chapel Down, which is a listed company under the
alcohol industry. The report will contain the description of the company and also different ratios
to be calculated after taking values from the annual report of the company to analyze the
profitability and also its improvement from different aspect. There will be a comparison of the
performances of the company with that of the previous year’s performance and then the final
recommendation will be given.

Running Head: FINANCIAL ANALYSIS
Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................5
Profitability ratio..............................................................................................................................5
Return on capital employed.........................................................................................................5
Gross profit margin......................................................................................................................6
Current ratio.................................................................................................................................6
Acid test ratio...............................................................................................................................6
Account payable turnover ratio...................................................................................................6
Account receivables turnover ratio..............................................................................................7
Inventory turnover ratio...............................................................................................................7
Earnings per share........................................................................................................................7
Price Earnings ratio......................................................................................................................7
Ratio and its interpretation...............................................................................................................8
Advantages and disadvantages of financial ratios.........................................................................13
Source of finance for Chapel Down..............................................................................................14
Auditors report...............................................................................................................................15
References......................................................................................................................................17

Running Head: FINANCIAL ANALYSIS

Running Head: FINANCIAL ANALYSIS
Introduction
One of the best winemaker in the world and the England’s leading winemaker, Chapel
down is one of the UK’s most exciting companies that make drinks. Chapel down presents a
world-class range of the sparkling and still wines. They are also well known for their award-
winning range of beers and ciders. The wines and champagnes are created with the use of
traditional method. The fruits that are used in the making are sourced from the south-east of
England. The liquor that are supplied forms the part of the British icon like the Golden Ramsay
and Jamie Oliver. The drinks made by the chapel down are served at some of the places with
highest reputation such as The Royal Opera house, The Royal Crescent Hotel & Spa, The
Donner Warehouse and the London Symphony Orchestra at the Barbican (Chapel Down 2020).
The company is focused on building strong and differentiated brands and also a valuable
brands which promises to deliver sustainable long term profitable business (Bilicka 2019). The
sectors that the chapel down work upon is one of the most profitable sector and it contains high
growth rate both in UK and abroad. The sector includes English wine, contemporary beers and
the crafted spirits. Chapel down has been successful in the creation of the portfolio of attractive
brands that has a premium positioning. It has got support from well executed marketing
strategies and professional, high level sponsorships, attractive experiential brand homes and it
also has an excellent customer base. All these help them increase their retail sales by 17% in the
year 2018.

Running Head: FINANCIAL ANALYSIS
Profitability ratio
Return on capital employed
An accounting ratio which is used to measure the profitability of the company after taking into
consideration, the capital used in the company.
Gross profit margin
For the calculation of the gross profit margin ratio, one has to take into consideration of the gross
margin which is the difference between the revenue and the cost of goods sold. The result gets
divided by the revenue to get the gross profit margin. It is generally expressed as percentage.
Current ratio
Current ratio is the ratio in the financial analysis which helps in identifying the liquidity of the
company in terms of assessing the fact that whether the company is capable enough to pay for its
short term obligations with the available resources. It helps in the comparison of the firms
current assets with its current liabilities. The formulae for the ratio is = current assets/ current
liabilities (Current Ratio 2019).
Acid test ratio
The asset test or the quick ratio as it is popularly known as, is the ratio which is calculated to
measure if the company has the ability and enough cash to pay for its immediate obligations or
liabilities, for example, the short term debt. (Acid-Test Ratio 2020)
The formulae for the acid-test ratio = cash and cash equivalents +short-term investment/ current
liabilities