Financial Ratio Analysis and Investment Appraisal: A Case Study of UK Gambling Companies

ACCOUNTING AND FINANCE FOR
MANAGERS

Table of contents
Section A.........................................................................................................................................3
1. a Financial ratio analysis.............................................................................................................3
1. b Identifying the best performing company...............................................................................11
1. c Identifying the poor performing company..............................................................................12
2.a Identifying and explaining the key stages in the capital investment decision making process
.......................................................................................................................................................13
2.b Identifying and explaining the key methods of investment appraisal.....................................14
Reference list.................................................................................................................................17

Section A
1. a Financial ratio analysis
Financial ratios may be regarded as one of the most reliable signs of the performance of
companies. Examining the development scene of the Gambling industry in the United Kingdom,
it can be concluded that scutinising the performances of the organizations is paramount. In this
table the performances of the said three Gambling organisations in the United Kingdom have
been perused utilizing the financial ratios:
Financial ratios of William Hill:
Financial ratios 2016 2015 2014
Profitability ratios:
ROA using the net income 6.73 8.09 8.67
EBIT margin 13.72 14.01 17.41
Gross profit margin 81.74 85.27 88.57
Liquidity ratios:
Current ratio 0.71 0.52 0.76
Shareholders liquidity ratio 1.52 2.60 1.36
Operational ratios:
Credit period (days) 29 24 24
Collection period (days) 5 1 2
Net assets turnover 0.80 0.95 0.81
Interest cover 4.51 5.47 5.76
Gearing ratio:
Gearing 65.86 63.07 73.30
(Source: Sports.williamhill.com 2018)

Financial ratios of Ladbrokes:
Financial ratios 2016 2015 2014
Profitability ratios:
ROA using the net income -6.02 0.45 3.52
EBIT margin -0.50 -0.19 6.72
Gross profit margin -14.15 -3.60 3.21
Liquidity ratios:
Current ratio 0.33 0.65 0.59
Shareholders liquidity ratio 1.45 1.07 0.71
Operational ratios:
Credit period (days) 25 15 16
Collection period (days) 1 2 2
Net assets turnover 0.62 1.36 1.25
Interest cover -0.19 -0.08 2.76
Gearing ratio:
Gearing 96.75 93.19 140.90
(Source: Ladbrokes.com 2018)
Financial ratios of Paddy Power:
Financial ratios 2016 2015 2014
Profitability ratios:
ROA using the net income -0.11 26.41 22.87
EBIT margin 0.88 15.54 18.42
Gross profit margin 76.91 75.92 80.97