Costco and Loblaws Financial Ratios
Added on 2020-03-16
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Running head: FINANCIAL ANALYSIS OF METRO INCFinancial Analysis of Metro IncName of the Student:Name of the University:Author’s Note:Course ID:
1FINANCIAL ANALYSIS OF METRO INCExecutive Summary:The current report aims to select and evaluate the financial performance of Metro Inc,which is a popular supermarket in the province of Canada. It is one of the giant food retailers inthe provinces of Ontario and Quebec in Canada. The report focuses on dissecting the existingbusiness and financial health of Metro Inc. In addition, it concentrates on providing criticalevaluation of the overall industry and the financial appraisal of the three chosen competitors thatinclude Loblaw Companies, Wal-Mart and Costco. It has been assessed that Metro Inc has stable financial position and the investors couldbuy shares for earning higher returns in future. In addition, Metro Inc has increased demand inthe market, as it could release its inventory at a faster rate compared to its competitors. Thus, itneeds to issue new equity shares for raising funds through equity financing to minimise theoverall debt burden.
2FINANCIAL ANALYSIS OF METRO INCTable of ContentsIntroduction:....................................................................................................................................3Analysis of the current business and financial health of Metro Inc:...............................................3Critical analysis of the industrial sector and financial evaluation of three competitors:...............18Critical appraisal of the financial strengths and weaknesses of Metro Inc in comparison to thechosen competitors:.......................................................................................................................19Recommendations for Metro Inc:..................................................................................................20Conclusion:....................................................................................................................................20References:....................................................................................................................................21Appendices:...................................................................................................................................24
3FINANCIAL ANALYSIS OF METRO INCIntroduction:The current report aims to select and evaluate the financial performance of Metro Inc,which is a popular supermarket in the province of Canada. It is one of the giant food retailers inthe provinces of Ontario and Quebec in Canada (Corpo.metro.ca, 2017). The report focuses ondissecting the existing business and financial health of Metro Inc. The second segment of thereport concentrates on providing critical evaluation of the overall industry and the financialappraisal of the three chosen competitors that include Loblaw Companies, Wal-Mart and Costco.The third and fourth segments of the paper focus on critical appraisal of the financial strengthsand weaknesses of Metro Inc in contrast to its rivals and the financial techniques usedrespectively. Finally, the report sheds light on providing recommendations to Metro Inc thatwould help in improving the overall financial position and performance of the organisation in theCanadian market. Analysis of the current business and financial health of Metro Inc:Existing business scenario of Metro Inc:It has been observed that Metro Inc would consolidate its five traditional banners of foodstore in Ontario under the name Metro. It has lend support through investment of $200 million inupgrading the store facilities, marketing and food offering for forming the largest grocery bannerof the nation (Newswire.ca, 2017). This decision has been undertaken to rebrand the name of theorganisation for capitalising on marketing and operating efficacies through unity of individualstrengths of the current banners in Ontario along with sharing effective practices with the storesin Ontario and Quebec. Finally, it has earned revenue of around $11 billion having employee
4FINANCIAL ANALYSIS OF METRO INCbase of 65,000, it has become the leader in the Canadian food sector (Brigham & Ehrhardt,2013). Financial health of Metro Inc:The financial health of Metro Inc could be evaluated with the help of ratio analysis, asthis analysis helps in ascertaining the overall financial position and performance of anorganisation in its operating market (Batta, Ganguly & Rosett, 2014). The following categoriesof ratios are considered for evaluating the financial health of Metro Inc:Liquidity category:In the words of Bodie (2013), liquidity ratios help in gauging the ability of anorganisation in paying debt obligations and safety margin through the computation of variousmetrics. These metrics include the following:Working capitalAcid test ratioCurrent ratioCash current debt coverageReceivables turnoverAverage collection period (in days)Inventory turnoverDays in inventoryDays payableParticularsDetailsMetro Inc20152016
5FINANCIAL ANALYSIS OF METRO INCCurrent AssetsA 1,173 1,193 Current LiabilitiesB 1,064 1,068 Working CapitalC=A-B 109 125 InventoryD 824 828 Prepaid expensesE 19 20 Acid test ratioF=(A-D-E)/B 0.31 0.32 Current ratioG=A/B1.101.12Cash from operatingactivitiesH 678 707 Opening current liabilitiesI 1,077 1,064 Closing current liabilitiesJ 1,064 1,068 Average current liabilitiesK=(I+J)/2 1,071 1,066 Cash current debtcoverageH/K0.630.66Sales revenueL 12,224 12,788 Opening accountsreceivableM 319 304 Closing accountsreceivableN 304 318 Average accountsreceivableO=(M+N)/2 312 311 Receivables turnoverP=L/O39.2441.12Average collectionperiod (in days)365/P9.308.88Cost of salesQ 9,814 10,271 Opening inventoryR 821 824 Closing inventoryS 824 828 Average inventoryT=(R+S)/2 823 826
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