Financial Statement Analysis: DPD Performance and Recommendations

This report provides a comprehensive financial analysis of DPD, a leading international parcel and logistics provider. It begins with an introduction to financial statements and their importance, followed by a detailed overview of DPD's background, including its strengths, weaknesses, opportunities, and threats (SWOT analysis). The report then delves into the significance of accounting and financial departments, outlining their key functions such as financial accounting, management accounting, taxation, and auditing. Furthermore, it explores the investment, financing, dividend, and working capital functions within the finance department. The analysis extends to the evaluation of financial ratios, including Return on Capital Employed (ROCE), net profit margin, and current ratio, providing interpretations and recommendations for improvement. The report concludes with insights into DPD's financial performance and strategic recommendations.

Financial Statement

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................5
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial statements are the statements which reflect the various elements and factors
including profits, assets and liabilities of the company and replaced by the manger of the
company to present the financial position and financial performance at point of time. Ot is the
set of financial statements include income statement, balance sheet, statement of cash flow and
statement of owner's equity.
The study is based on the financial statements and different management function which
helps the business in achieving their objective, the auditing,taxation, dividend, investment and
other function and their roles will be explained in the report for better understanding of each
function. In addition to this the different ratios and the performance on the basis of ratios will
also be discussed to interpret the efficiency and recommendation can be given to improve the
performance.
TASK 1
DPD is international parcel and logistic provider and a member of the one of the Europe's
leading parcels groups which is wholly owned by France la Poste which is the second largest
postal group on Europe. It is leading parcel brand of UK based and unrivalled ground base
services to the Europe and air express services to the rest of the world. It was founded in 1976
which is taken over by the La Poste in 2001(Minnis and Sutherland, 2017).
It has 11000 people who are working across the UK operating 3675 vehicles from 56
different location and servicing 6500+ customers. Company having reputation for being the
most innovative carrier in the express parcels sectors. DPD company has also sister company in
the UK, DPD local which is franchised network and which focuses on express parcel services for
small and medium enterprises. It is considered to be the one of the Europe's leading business to
business parcel delivery system(Berger, Minnis and Sutherland, 2017). The company's annual
turnover is around 183 million USD and its earning per share is 4.30. the company being al
leading company having many strengths which helps teem in their further growth and
development and also some weakness which are required to overcome for capturing lager share
in the market . The SWOT analysis of the company is as follows:
 STRENGTHS
The biggest strength the company
holding is the customer loyalty by
WEAKNESSES
 Slow to address the new market
1

delivering the effective and quality
services.
 Strong proven financials
 Investment in research and
development and technology(Traina,
2018).
 Industry specific solutions
 strong brand reputation.
 Global network in 56 locations
 efficient workforce
 Larger market share.
opportunities
 Slow adoption of the new technology
 Lack of transparency
 Parcel lockers are private cation and the
public authorities do not have the
information about the impacts.
 The final leg of the journey have to e
made by the customer.
OPPORTUNITIES
 A Rising off shoring and near shoring
 E-commerce and supply chain
revolution across the sectors
 rapid growth of the logistic market
THREATS
 Formidable competition
 Foreign currency fluctuations
 increasing competitors
 varying market demand
 complexities in parcel delivery
management(.Rouxelin, Wongsunwai
and Yehuda, 2017).
 Instability in economic condition
 Low quality and inefficiency of roads
infrastructure.
Importance of accounting and financial department
Accounting department is basically responsible for the recording and reporting the cash
flow transactions of the company. It plays some key role and responsibility which includes
account receivables, account payables, financial reporting, account payables, payroll and
maintaining the financial records(CampbellL and et.al., 2019). Accounting and financial
departments plays very crucial role in the organisation and its management effectively and
efficiently accounting for the company's income and expenses the company is bale to mage the
flow of money which helps in smoothly directing the course of business.
2

' financial department is the part of the organisation which manges the money and the
function of the finance department generally includes planning, organizing, auditing, accounting
and controlling the company's finance(Alali, 2018). Preparation and communicating the
financial statements is the responsibility of the financial department itself. It is considered as the
another important element which plays essential role in the DPD for carrying the activities of the
business, investment of good capital is required which also needs the effecient planning and
maintaining of capital so that it can be used appropriately without disruptions in the organisation
Accounting department is responsible to report about the financial information about the
financial position, performance and cash flows of the business. this information is used to reach
the decisions regarding managing the business, investment, etc.
accounting and finance both have essential role in the company as business is completely
operated by money and the business do not have effective control on the money then it will lead
to the wastage of financial resources (Karlosand et.al., 2017). Hence, for effective controlling of
the money accounting is to be done that is proper accounting for all the income and expense is
required so that they able to mange and control the flow of money which directly affects the
business and its operations.
Accounting department
Financial accounting
It is the accounting which keeps the track of company's financial transactions . By
following and using the standard guidelines DPD can record the transactions , summarized and
then presented in the form of financial report or financial statements such a balance sheet,
income statement and cash flow(Moroney and Trotman, 2016).
Management accounting
It generally involves collecting, analysing and reporting the information about the
operations and finance of the business(CHEN,2018). Management accounting is presentation of
analysis of the business activities to the internal management to facilitate the decision making.
This function helps the DPD in preparing management reports and accounts which provides the
accurate and timely financial and statistical data which ultimately helps in making the useful and
fast decisions(Hosseinpour and Jans, 2016).
Tax functional
3

It is the function which properly defined and implemented in the company which
gradually increase the transparency of tax settlements, and adds the value creation in the business
activity, optimizing the risks management and which leads to significant;y reduce the costs of
managing the tax area and department in the DPD.
Auditing function
It is the function which helps the auditor to assess nad analyse the risk in the company's
financial reports. It basically performs the necessary function in the company and also provide
the opinion to the shareholders in true and fair way about the financial statements prepared by
them(Ward and Lowe, 2017). Auditing also helps in preparation of and disclosing the facts on
the basis of which transaction and financial report are maintained and communicated to the user.
Finance department
Investment function
Investment function of finance department of the DPD and it is the responsibility of the
department to effectively and efficiently analyse, evaluate the available investment opportunity
and must choose the best one which is capable of generating the higher profits .The most
attractive investment project help them to expand their business growth(Bédard and Courteau,
2015). After evaluating all the pros and cons of each investment project than only they are
required to choose the investment project which is most attractive as it helps the company in the
growth and development.
Financing function
It is part of the financial management and the activity concerned with the controlling and
planning of the financial resources in the DPD. The finance function includes the acquiring and
effectively utilisation of funds which are necessary for efficient operations(van Eeghen and
Visscher, 2017). Overall this function includes the activity of financial planning, raising of the
funds, allocation of funds and controlling the funds so that optimum utilization of all the
resources can be done which helps in achievement of overall organisational goal.
Dividend function
Dividend is basically that part of the profit which is distributed among the shareholders of
the company(Goldmann, 2017) . The dividend amount is issued in the form of cash payments,
4

shares of stock ,etc. DPD offers dividend in form of mutual funds and exchange traded funds
also and these rewards are paid to the shareholders are generally originated from the company's
profit.
Working capital function
Working capital is the difference of current assets and current liabilities payments of the
current liabilities are paid off from the current assets of the company. Company needs to ensure
that there is enough availability of the current asset so that current liabilities can be
met( Patil,Kenjale and Kanade,2017). required availability of working capital helps in smooth
functioning of the business operations as effcetive availability of all the resources and raw
material will avoid disruptions and which leads the DPD to run smoothly and efficiently.
TASK 2
Return on capital employed
Return on capital employed is the ratio which helps in measuring the company's
efficiency to generate the profits from the capital employed by them by comparing it's to the
operating profit(Rahman, 2017) . capital employed is basically the total assets of the company
less all the current liabilities.
5

From the table interpretation can be made that Alpha Ltd. Has higher capital employed in
the year 2017 compare to the year 2018 as they have 19.60%of capital employed in 2017 which
depicts that company has earn higher amount of profit in 2017 compared to the year 2018 that us
they can invest back the larger chunk of profits in company for benefiting the shareholder. The
capital which reinvested again employed at higher rate of return which will helps in producing
the higher earnings per share growth and this higher Return on capital employed is representing
that company has successful growth in 2017 and they decline in their profit earning capacity on
their capitals in 2018 due to the low productivity or operating inefficiently.
This can be improved by increasing the top line tat is operating profit without increase in
the capital employed . They can also increase their return on capital by maintaining operating
profit but reducing the value of the capital employed. Low return indicating their company is
inefficient in managing its assets and liabilities and to improve and increase the return Alpha Ltd.
Can do the flowing things:
 Selling of the outdated machinery can lower the company's asset base .
 Reducing anf removal of unused assets also allow for lower capital to employed to
operate the same level of production
 paying off the debts, leads to reduction in the liabilities can also help them in improving
the ROCE ratio of the company in long run(Bédard and Courteau, 2015).
Net profit margin
Net profit margin is the revenue percentage which remain after all the operating
expenses, taxes and interests and also the preference stock dividends deducted from the total
revenue of the Alpha Ltd. It is basically the profit percentage which company generates from its
total revenue after deducting it's all costs(Minnis and Sutherland, 2017).
The above ratio depicting that company has higher net profit margin in year 2017 that is
of 12.55% compared to 2017 as they generate only 8.75% of net profit margin ratio .It reflecting
6

that ability of the company to turn revenue into profits after deducting all expenses of running
the business including taxes and debts payments as well. In 2017 the company's is in the stage of
the improvement of their operational efficient and probability whereas in 2018 company showing
lower net profit margin which interpreted that company is net operating efficiently and they are
not able to generate the higher profit margin because of the high cots payments.
 The company needs to control their costs by continuous and regular monitoring so that
cots can be reduce and profits can be made out of the total revenue.
 Reducing the utilities
 Reducing the insurance premiums
 Reducing labour cots
 Reducing operations costs
 Optimum utilisation of all resources(Hosseinpour and Jans, 2016)
 Efficiently managing the operational activities.
 Increasing the sales revenue, etc.
Current ratio
It is the liquidity ratio which helps the company's to measure the ability of the resources
available with them to pay off their all current liabilities and obligations. It is basically the ability
of the current asset to pay of their current and short term liabilities(Berger, Minnis and
Sutherland, 2017). it measures that firm having enough resources to meet their short term
liabilities and obligations and this could be calculated as current assets divided by the current
liabilities.
The above ratio depicts that company has higher current ratio on 2017 compared to the
year 2018. the company has earned 2.34 current ratio which is much higher than .93 of 2018. this
depicts that in year 2017 company having enough resources and current assets availability with
them they are able to pay off their all the current liabilities and short term obligations which
helps them to increase and improve their overall efficiency and in their further growth. The
decreasing current ratio depict that availability of the resources is not enough with the company
on 2018 to meet their current obligations which resulting in lower current ratio. Th company
7

needs to improve this ratio for further growth and development. . Alpha Ltd needs to focus on
following things to improve this ratio:
 They should avoid useless assets and make available the useful assets which can be used
to meet its current obligations.
 Controlling the overhead expenses
 Negotiating the longer payment cycles(Karlosand et.al., 2017)
 Using long term financing instead of short term financing to acquire the assets-
 Removing the short term debts from balance sheet
 Ensuring that invoicing customers as quickly as possible and ensure that they pay on
time.
Hence, there are many other factors which helps the company in improving their current and
liquidity ratios.
Debtor collection period
Debtor collection period indicating that the averge time taken by the many to collect the
dues from trade debts result of the credit sales made by the company(Traina, 2018). it enables the
company to compare the real collection period with the theoretical credit period so that
corrective action scan be taken if needed. This can be calculated by dividing the amount owed
by trade debtors by the annual sale on credit and by multiplying it with 365 days so to ascertain
at the average time period.
From the above ratio it can e interpreted that company take more number of days on
average in 2018 compared to 2017 as in 2017 they have taken only 68 days whereas in 2018
Alpha Ltd. had taken 73 days on average to collect their dues from the debtors. This ratio is
important and necessary for converting the business receivables into the cash. lower average
collection period indicating that company is collecting their payments faster whereas high
collection period reflects the company is inefficient in collecting their payments and taking more
time to collect their dues. The company needs to focus on the factors which helps the to improve
their efficiency and to reduce the collection period in order to receive faster payments o that it
8

can reinvest back into different projects to chunk out the more profits. The following factors
which help in decreasing the average number of days:
 Moving fast on past due receivables
 creating and account perceivable ageing report
 being proactive in invoicing and collection efforts
 considering offering and early payment discounts
 charging late fees
 offering incentives
 move to system online(Alali, 2018)
 tracking invoices etc.
Creditors payment periods
Creditors payment periods is the average time taken by the company to settle down its
debts to their trade suppliers. This indicates the average numberer of days the business takes to
pay their dues to their suppliers. Creditors payment period can be calculated by dividing the tars
payables by the average daily purchase by the company on credit from its suppliers(.Rouxelin,
Wongsunwai and Yehuda, 2017). it give an insight that business is having the full advantage of
trade credit available to them. Creditor days basically estimated that average time taken by the
business to settle down the debts with the trade suppliers of raw materials to their company.
From the ratio it can be interpreted that company takes more time on 2018 compared to
2017 for paying off their dues to its suppliers. alpha ltd taken 77 days in 2017 and 160 day in
2018 which is much more comparatively to the previous year. This showing the decreasing
efficiency of the company to perform in the organisation. This declining turnover ratio from one
period to another which clearly indicating that company is paying its suppliers more slowly and
also the indicator of worse financial condition as they have no enough available financial
resource which can be used to pay of their debts to the suppliers of the company, there are many
ways through which company can reduce its creditor payment period in order to generate strong
goodwill in the market so that in future they can easily avail the credit and also to satisfy their
9

suppliers in order to get discounts and offering which is only possible when timely Payment
made to the creditors by the company, some factors which helps in reducing the payment
period ;
 Negotiating the terms of payment with the suppliers
 Changing payment terms'
 Automating credit control
 External credit control
 Improving stock control
 Increasing sales
 Generation of cash(CampbellL and et.al., 2019)
Hence, there are different factors which can be used to improve the company;s efficiency to
generate enough resources In order to reduce the time of payment period.
CONCLUSION
The above report concludes that different accounting function helps the company to
operate smoothly and effectively which involves management function. Auditing, tax, dividend,
accounting, investment, working capital,finance and many more and each function pays different
and essential roles at their levels.
The report also concluded about some different profitability and efficiency ratios which
helps to measure the efficiency of the company to perform and also to measure the company's
performance in addition with the recommendation to improve so that organisation can earn
higher amount of profit and able to acheive its goal and lead to the path of the success and
further growth..
10