Financial Management for Purchaser

Running head: FINANCIAL MANAGEMENT FOR PURCHASER
Financial Management for Purchaser
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Executive Summary
Financial analysis of the capita PLC and the Serco group PLC is done so that valuable
comparative analysis can be performed. The critical analysis of the collapse of Carillon is
evaluated in detailed process which has been discussed in task A and task B.

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Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................4
Task A:...................................................................................................................................4
Financial Analysis of Capita PLC and Serco Group PLC.................................................4
Liquidity Ratios:.................................................................................................................4
Profitability Ratio:..............................................................................................................5
Long Term Solvency Ratio:...............................................................................................6
Working Capital Ratio:......................................................................................................8
Overall Financial Analysis:................................................................................................9
Limitations of such analysis:............................................................................................10
Task B..................................................................................................................................10
Case Study on the collapse of Carillon............................................................................10
Financial Risk...................................................................................................................10
Strategic Supplier.............................................................................................................11
Ethical issues and the things learned from such collapse................................................12
Critical analysis and recommendation of the scandal......................................................13
Conclusion................................................................................................................................16

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Introduction:
The aim of the assignment is to concentrate on the financial analysis of Capita PLC
and Serco Group PLC for performing a comparative analysis regarding the acceptance of the
project. As a director of company the comparative financial analysis is performed to
understand the financial viability of both the business (Karadag 2015). In task A, the financial
analysis of both the company is evaluated accordingly and the strength and weakness of both
the business has been evaluated accordingly with the help of some of the key financial tools.
The financial tools used for performing the analysis is the fundamental ratios which are the
liquidity, profitability, long term solvency and the working capital ratio of both the company
has been measured in the conducted study accordingly. The financial ratios played a
significant role regarding accepting the contract of the business.
In task B, the collapse of the Carillion has been discussed which happened during the
year 2018 and the significance of analyzing the financial performance of the company in
various perspective. The role played by the upper level management of the company have
been depicted which is such a major collapse took place during that year. The reason
associated with such collapse are also discussed in the conducted study. The ethics and the
payments of the company has been critically analyzed during the conducted study. The lesson
learned from the winding up of Carillion has been discussed in a detailed basis so that the
companies going through such a major crisis may take a turn by bringing major changes in
the system in order to bring long term stability in the financial position of the business.

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Discussion:
Task A:
Financial Analysis of Capita PLC and Serco Group PLC
The financial analysis of both the company is performed because analyzing the
financial situation of the company is needed before accepting any kind of projects. Hence,
before accepting any project it is needed to analyze the financial position the business. For
that purpose, ratios are needed to be calculated in order to understand whether the business of
the company is sound. Evaluating the project in various dimensions by collecting the data
from the annual reports. In this case, the financial analysis of Capita PLC and Serco Group
PLC is performed in order to understand the performance of the business of both the
company (Capita.com., 2019). The business objective of the Capita PLC deals with the
process outsourcing, this company outsource the professional services. The computed key
ratio analysis of business of both the company is analyzed in the conducted study. The
liquidity, profitability, working capital and long term solvency ratios have been evaluated for
both the company in order to understand the financial viability of the business (Allen, Gu and
Kowalewski, 2018).
Liquidity Ratios:
The liquidity ratio of the company gives information’s regarding the company’s
ability meet the liabilities or the financial obligations. Liquidity means that the time taken by
the assets of the company to get quickly converted into cash.

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Current Ratio:
As per the current ratio of both the company, it is measured that the company ability
to pay off its current liabilities with the current assets. The higher the ratio the better is the
financial performance of the company in terms of the current ratio (Strouhal 2015). The
Current ratio of Serco group PLC is much higher than the Capita PLC, which further
indicates that as per the comparison of both the company in terms of the current ratio, the
liquidity position of the business of Serco group PLC is much higher than the Capita PLC.
The current ratio is much favorable of Serco Group PLC in the year 2016 which was 1.01
more than the other two years. This indicates that the liquidity position of the Serco group
PLC is much better than the Capita PLC as the current ratio of Capita PLC is slightly low
than the Serco group PLC. In case of current ratio analysis the Serco group PLC will be a
better option (Serco.com., 2019).
Quick ratio:
The quick ratio evaluates the intensity of the liquidity position of the business. As per
the evaluation of both the companies in terms of the quick ratio of the company, the