Financial Statement Analysis of Retail Industry in Bangladesh
Added on 2020-01-07
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Financial Statement Analysis
Table of ContentsINTRODUCTION...........................................................................................................................3PART 1............................................................................................................................................3Brief Introduction of companies..................................................................................................3Ratio analysis...............................................................................................................................3PART 2............................................................................................................................................7Background..................................................................................................................................7Financial statement's analysis......................................................................................................7Internal and external ratios..........................................................................................................8Ratios interpretation.....................................................................................................................9Share price evaluation................................................................................................................17Recommendation.......................................................................................................................20CONCLUSION..............................................................................................................................20REFERENCES..............................................................................................................................212
INTRODUCTIONFinancial statement are one of the important statement prepared in the business whichreflects the financial performance of the firm. Sainsbury and marks and Spencer has beenselected for this project report in analyzing their internal capabilities. Ratio analysis is the majortool used in assessing the financial capabilities and skills earned by these entities.PART 1Brief Introduction of companiesMarks and SpencerThis firm counts among the leading retailer of the UK who provides variety of services inorder to please their buyers (Marks&Spencer, 2016). The current business is listed in the Londonstock exchange with a constituent of FTSE 100 indexes which signifies its legal identity. Thisfirm specializes in the selling of clothing, home products and luxury food products. This gaincompetitive advantage over Primark by offering food products other than just providing clothingservices. The current firm has chosen for this analysis on the basis of its one of the segment thatis supermarket sector.SainsburyIt is famous for offering variety of grocery products which increases the importance andstatus of this entity in the external market. This is regarded as the second largest supermarketchain in the whole UK. The current market position of this entity is not good as the biggestglobal competitor Tesco has overtaken this firm (Sainsbury, 2016). The Tesco being a globalcompetitor affect the performance of this firm by reducing its market share with a remainingshare of 16.9%. The selection of this entity for the analysis in the current report in assessing thesupermarket sector. The efficiency of the supermarket sector in relation with the food and otherkinds of grocery products offered by the Marks and Spencer.Ratio analysisThis is regarded as one of the important tool used in the comparison of the previous yearfigures of the firm with its actual results (Clark, 2016). The ratio analysis is important tool usedby the management of both the firm in order to assess the financial statements. The financial3
performance of the company are judged by categorized into various segments such asprofitability, liquidity, efficiency, investment and solvency ratios.Table 1: Ratios of Marks and SpencerParticularsFormula201320142015Profitability ratiosNet sales100271031010311Gross profit379738713986Net profit467525487Operating profit664599620GP ratioGross profit/Net sales*10037.87%37.55%38.66%NP ratioNet profit/Net sales*1004.66%5.09%4.72%Operating profit ratioOperating profit/Net sales*1006.62%5.81%6.01%Liquidity ratiosCurrent assets126813691455Current liabilities223823492112Inventory767846798Quick assetCurrent asset-inventory501523657Current ratioCurrent asset/Current liabilities0.56657730120.5828011920.6889204545Quick ratioQuick asset/Current liabilities0.22386058980.22264793530.3110795455Efficiency ratiosTrade receivables141181177Net credit sales100271031010311COGS623064396326Average inventory767846798Receivables turnoverTrade receivables/Net credit sales5.1326418676.407856456.2656386383Inventory turnoverCOGS/Average inventory8.12255541077.61111111117.92731829574
Solvency ratiosDebt167716061698Equity250527073200Debt to equity ratioDebt/equity 0.66946107780.59327669010.530625Investment ratioEarning available forshareholders467525487Outstanding shares100001000010000EPSEarning available for equityshareholders/outstanding shares0.04670.05250.0487Table 2: Ratios of SainsburyParticularsFormula201320142015Profitability ratiosNet sales233032394923775Gross profit220262256222567Net profit614716-166Operating profit82094376GP ratioGross profit/Net sales*10094.52%94.21%94.92%NP ratioNet profit/Net sales*1002.63%2.99%-0.70%Operating profit ratioOperating profit/Net sales*1003.52%3.94%0.32%Liquidity ratiosCurrent assets190143624505Current liabilities311567656923Inventory767846798Quick assetCurrent asset-inventory113435163707Current ratioCurrent asset/Current liabilities0.61027287320.6447893570.6507294525Quick ratioQuick asset/Current liabilities0.36404490.51973390.53546155
438246051Efficiency ratiosTrade receivables25816552055Net credit sales233032394923775COGS220262256222567Average inventory9871005997Receivables turnoverTrade receivables/Net credit sales4.041110586625.223391373331.5488958991Inventory turnoverCOGS/Average inventory22.316109422522.449751243822.6349047141Solvency ratiosDebt247820892337Equity573360035539Debt to equity ratioDebt/equity 0.43223443220.34799267030.4219173136Investment ratioEarning available forshareholders614716-166Outstanding shares100001000010000EPSEarning available for equityshareholders/outstanding shares0.06140.0716-0.0166PART 2BackgroundThe current project report is all about defining various financial statement's in order toassess its efficiency over the years (Grimm and Blazovich, 2016). Both the companies operatingin the same industry of supermarket sector are taken into consideration for the purpose ofanalysis. The marks and Spencer leads all other competitors in the same market by diversifyingits existing business into other sectors (Grant, 2016). On the other hand, the Sainsbury operatedin the supermarket sector has limited market share than compared to the biggest competitor6
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