(PDF) Financial Analysis of Primark Stores Ltd

Added on -2020-07-22

The enclosed report deals with the financial analysis of Primark which is a clothing giant and a market leader (Cucchiella and Rosa, 2015). Critical appraisal and strengths and weaknesses of Primark. Recommendation of the price range for the shares of Primark for use in IPO. Factors impacting valuation of the share price. Primark's main competitor is M & S which has a good market share. Primark should be able to form and implement competitive strategies so that it may gain market share and become ahead of it. You can also check" PESTLE Analysis of Primark".

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Financial Analysis of Primark
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11. Analysis of current situation and financial situation of Primark........................................12. Researched evaluation and financial competitor analysis..................................................23. Critical appraisal and strengths and weaknesses of Primark..............................................44. Recommendation of price range for the shares of Primark for using in IPO.....................55. Factors impacting valuation of share price.........................................................................66. Critical evaluation of the finance techniques.....................................................................77. Recommendations for corporate governance structure......................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONFinancial analysis is important to be carried out by the organisation as provides clearpicture about the financial situation in the best possible manner. The enclosed report deals withfinancial analysis of Primark which is clothing giant and a market leader (Cucchiella and Rosa,2015). Various competitors' are available in the market which eventually have impact on it. Assuch, financial analysis is important for it so that it may work upon weaknesses and maximisesstrengths in the best possible way. For carrying out the financial analysis, financial ratios play avital role to the company and as a result, Primark is able to carefully analyse its strengths andweaknesses quite effectively with much ease. It may be said that ratios are vital to organisationto have an eye on the financial position in effectual manner. 1. Analysis of current situation and financial situation of PrimarkPrimark plcParticulars Formula 201420152016Profitability ratioGross profit marginGross profit / net sales * 10024.30%23.60%23.40%Liquidity ratios 201420152016Current ratioCurrent assets / current liabilities 0.420.050.73Quick ratioQuick assets / current liabilities 0.050.080.13Solvency ratio201420152016Interest coverage ratioEBIT / Interest Expense15.17%12.95%19.61%Debt to equity ratioLong term debt / shareholders equity 2.43%3.20%2.30%Efficiency ratio 2014201520161
Stock Turnover ratio COGS ÷ Average Inventory6.10%5.65%5.05%Fixed assets turnover ratioNet sales / Average fixed assets2.81%2.80%2.60%Investment ratio201420152016Dividend payout ratio Dividends / Net income 0036.70%Earnings per share Net income/ Outstanding shares0.96%0.67%1.03%2. Researched evaluation and financial competitor analysisThe Primark has 3 competitors such as New look, Next plc and M & S (Marks andSpencer). These competitors have great impact on Primark as market share are divided in thesecompanies as well. The financial ratios calculated above will provide clarity about the Primarkplc of its financial performance (Kallala and et.al, 2015). The financial performance of Primarkhas increased from past years considerably and as a result, it is performing well in the market.New look plc, Next plc and M & S are performing well in the market and as a result, Primark hasto perform well so that it may outreach them in the most proficient way. Below are the financialratios of three plc's :New look plcNext plcM & S plcParticulars Formula 201620162016Profitability ratioGross profit marginGross profit / net sales * 10034.80%77.40%39.10%Solvency ratioInterest coverage ratioEBIT / Interest Expense27.21%5.24%5.84%2

Analysis And Appraisal Of Primark's Performances

Hereby it can be articulated that financial analysis plays important role in valuing a company and extracting its financial strengths and weaknesses in the best possible way. It is important for the company so that it may analyze weaknesses and implement well-structured strategies by which weaknesses are transformed into strengths. For carrying out financial analysis, ratios play a vital role in the organization. Ratios are calculated with the help of a balance sheet and income statement which provide accurate results to the organization. Primark is able to carry out the ratios by referring to the financial statements and as a result, accurate conclusions are drawn out of it which provides its financial position in the best possible way. "Financial statements of Primark" are evaluated successfully.

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