Financial Analysis of Harrison plc

This assignment requires a financial analysis of Harrison plc. Students must calculate and interpret key financial ratios to assess the company's liquidity, solvency, profitability, and efficiency. The analysis should also compare Harrison plc's performance to its major competitors (Tesco, Alders Ltd, and one other unnamed positive company).

Financial Coursework

Table of Contents
INTRODUCTION..........................................................................................................................1
PART 1............................................................................................................................................1
Q1a: Analysis by using ratios.................................................................................................1
Q1.b: Comparative analysis of Harrison’s share price 2012 to 2016.....................................3
Q1.c: Assess the strength of premium investment................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
In every business organisation, it is essential to make proper analysis of financial position
of the company before making any investment decision. It is consider as one of the crucial
aspects for accountant to evaluate each and every financial statements by using certain tools and
techniques (Vogel, 2014). Under this project, financial statement of Harrison Plc is being
analysed for the period of 2012 to 2016 by using ratios. By this, effective decisions can be made
whether to making investment under the company is profitable for the investors.
PART 1
Q1a: Analysis by using ratios
For getting better outcomes for the investors in terms of profitability and effective
decision in coming time, it is necessary to analyse financial position of Harrison plc. The best
possible ways to determine the current status is by using various ratios. As, by the help of useful
ratios profitability, efficiency and liquidity position of the company can easily be identified
(Sheikhi, Ranjbar and Oraee, 2012). Some of them are discussed underneath:
Profitability ratio: It refers as systematic class of financial metrics those are utilise to assist a
business capability to incur revenues compare to all expenses and relevant costs that are
generated by the company during the time. Types of profitability ratios are:
Ratios Formula 2012 2013 2014 2015 2016
Gross profit
ratios
Gross profit /Net sales*100 8.072
13
7.950
483
7.90757
381
8.282
32
7.392
77
Net profit ratios Net profit /Net sales *100 2.615
18
2.547
372
2.50320
924
2.864
88
1.875
53
Operating ratios Operating income / Total
revenue *100
3.894
45
3.905
971
3.77406
932
4.201
54
2.981
5
Return on equity Net income/ Total
shareholder equity*100
10.72
6
9.906
152
10.3907
638
8.696
75
6.209
97
Return on assets Net income/Total assets*100 4.887
95
4.645
098
4.64617
584
4.526
02
3.016
57
Return on capital
employed
Operating profit/ Equity
share capital *100
0.386
96
0.401
101
0.49439
462
0.243
66
0.228
19
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Liquidity ratios: It refers to be the ability of a company to pay off its financial debts and
obligations those is come due in an accounting period of time (Working capital ratio, 2017). It
can be determine by using plenty of ratios. Those are discussing underneath:
Ratios Formula 2012 2013 2014 2015 2016
Current
ratio
Current assets/ current
liabilities
0.528061
224
0.66723
32
0.58105
939
3.457
67
0.7803
28798
Liquid ratio Liquid assets/current
liabilities
0.269132
653
0.34840
24
0.26420
546
0.575
28
0.4977
32426
Net
working
capital ratio
Working capital Total
assets
4.65909E
-05
5.437E-
05
4.6149E-
05
0.000
23
5.2778
4E-05
Efficiency ratio: It is known as all those non interest expenditure less loss on foreclosed
assets. This particular ratio is used to determine total capability of company to meet out future
aims with its available resources. There are so many ratios by which Harrison Plc can evaluate
their financial efficiency to make further investment decision. Some of them are mention below:
R
atios
Formu
la
2
012
2013 2014 2015 2
016
T
otal
assets
turnover
ratios
Sales/
Total assets
1
.8
1.8 1.8 1.57 1.
608
I
nventor
y
turnover
ratio
Sales/
inventory
2
6.0
23.8 23.6
7
23.8 2
3.85
R
eceivabl
e
turnover
ratio
Sales/
Average
receivable
6
1.7
78.2 76.3
7
23.8 5
0.48
Debt to
equity
Debt/ equity -
0.587
2217
-0.62130692 -0.68313 -
0.476551637
-0.56739
Earning
s per
share
Net income -
Preferred
dividend /No.
of share price
1.810
4575
1.587743733 1.481013 2.219354839 1.676692
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Q1.b: Comparative analysis of Harrison’s share price 2012 to 2016
2012 2013 2014 2015 2016 % Change
1
b FTSE 100 Index 5488
5896 6622 6310 6945
% Change FTSE - 7.43% 12.31% -4.71% 10.06%
Tasco PLC Share Price 272 - - - 204 -25%
Alders PLC Share
Price 403 - - - 233 -42.18%
Luddles PLC Share
Price 337 - - - 493 46.29%
Harrisons PLC Share
Price 306 359 395 310 266 -13.07%
% Change Harrisons - 17.32% 10.03% -21.52% -14.19%
According to the above share prices, it has been seen that performance of Harrison plc in
2012 is started at positive stages and till then it is increasing at faster rate. In comparison to
other three company's it has been seen that their share prices is much more effective in the same
year. Whereas, Harrison share prices is increase in every year till 2015. But in 2016, it has been
seen downfall in prices. Only Luddles plc is in commendable position as relation to other.
(Baker and English, 2011). In 2016, percentage changes according to FTSE, everyone of them is
in negative position. Moreover, for investors Harrison is best company to take investment
decision because of their balance in share price. The overall results are indicating that share
prices of Luddles plc in terms of percentage is much higher in comparison to other.
Q1.c: Assess the strength of premium investment
From the above calculation of ratios, it has been seen that profitability position of
Harrison is more effective as they are having sufficient amount of profit and return to its
shareholders. As per the profitability ratios, it has been seen that Harrison’s is at commendable
position as comparison to its gross profit which is constant in every year with 7 to 8 %. It is
continuously increasing every year which means that Harrison is having sufficient chances of
growth in near future. It is the biggest strength of the company they are positive enough to face
any competition with their resources. Likewise, the liquidity position is also healthy enough to
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meet out its short term obligations that are presented with the company during the period.
Current ratios is under the ideal expectation which is 2:1. However, liquidity ratios are also in
more enough to convert liquid cash into one year of time in more easy manner. With the help of
efficiency ratio, it has been observe that Harrison is efficient to attain long term objectives with
available profit and market share. In order to make valuable decision regarding investment of
capital in the business of Harrison plc, it is good sign as they are at more suitable position in
terms of market price (Doucette and et. al., 2012). After making analysis of share prices of
Harrison's, it has been seen that -13% of downfall is been seen in 2012. The other three
company's are having more downfall as compare to Harrison's like -25% for Tesco, -42.18% for
Alders Ltd and 46.29% is only positive company which is in little bit healthy position. It can be
analyse that all three companies those are major competitors of Harrison is also having balance
share prices which can affect stability but at the end they are good enough to face any challenges
coming in front of them.
CONCLUSION
From the above project report, it has been concluded that financial analyse can help the
company’s to make valuable decision regarding certain investments. For this purpose, various
tools and techniques can be use by accountant to evaluate position of the company. Ratios
analysis is the best tools which is use under this project report to make certain suggestion about
the performance of Harrison plc. By this, it will be easy to determine necessary solution to
increase goodwill as compare to other competitors.
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REFERENCES
Books and journals:
Vogel, H. L., 2014. Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Sheikhi, A., Ranjbar, A. M. and Oraee, H., 2012. Financial analysis and optimal size and
operation for a multicarrier energy system. Energy and buildings. 48. pp.71-78.
Baker, H. K. and English, P., 2011. Capital budgeting valuation: Financial analysis for today's
investment projects (Vol. 13). John Wiley & Sons.
Doucette, W.R. and et. al., 2012. Three-year financial analysis of pharmacy services at an
independent community pharmacy. Journal of the American Pharmacists Association.
52(2). pp.181-187.
Online
Working capital ratio. 2017.[Online]. Available
through:<https://www.accountingtools.com/articles/2017/5/13/working-capital-ratio>.
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