Managerial Finance: Performance Analysis and Recommendations

MANAGERIAL FINANCE

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Portfolio 1................................................................................................................................................3
Portfolio 2..............................................................................................................................................14
CONCLUSION.........................................................................................................................................25
REFERENCES..........................................................................................................................................27

INTRODUCTION
Management finance is the operational division that deals with the management value of
information technology. This concentrates on measurement and not technology (Foster and
Kalev, 2016). In questions they can pose in annual reports, the distinction between administrative
and technical approach can be seen. This is related to proper management of finance of a
company. The project report on a company which have two options to make investment. In order
to make analysis of both companies: Sports direct plc, JD sports fashion limited ratio analysis
has been done. As well as some recommendations are given to poor performed company. In the
further part of report, two project of Recycle limited has been analyzed by help of investment
appraisal techniques.
MAIN BODY
Portfolio 1
(a) Calculation of ratios:
1. Current ratio
All data in Millions except ratios Sports direct plc JD sports fashion limited
2017 2018 2017 2018
Current assets 1274 1485.3 714 972
Current liabilities 740.9 709.1 535 682
Current ratio 1.72 2.09 1.33 1.43
2. Quick ratio
Quick assets 599.8 611.9 366 494
Current liabilities 740.9 709.1 535 682
Quick ratio 0.81 0.86 0.68 0.72

3. Net profit margin
Net profit 231.7 27.6 179 232
Sales 3245.3 3359.5 2379 3161
Net profit margin 7.14 0.82 7.52 7.34
4. Gross profit margin
Gross profit 1330.6 1335.1 1164 1532
Sales 3245.3 3359.5 2379 3161
Gross profit margin 41.00 39.74 48.93 48.47
5. Gearing ratio
Total debt 1210.5 1635.4 627 856
Total equity 1238.3 1214.2 552 770
Gearing ratio 0.98 1.35 1.14 1.11
6. Price earnings ratio
Share price 328.7 354 282.5 375
Earnings per share 39.4 4.6 0.18 0.24
Price earnings ratio 8.34 76.96 1569.44 1562.50
7. Earnings per share ratio
Net income 231.7 27.6 164 217
Outstanding shares 334.7 6 911.11 904.16
EPS 39.4 4.6 0.18 0.24

8. Return on capital employed
Operating profit 22.5 26.5 247 309
Capital employed 1707.9 2140.5 644 944
ROCE 0.01 0.01 0.38 0.33
9. Inventory turnover ratio
Cost of goods sold 1215 1630 1914.7 2024.4
Average inventory 348 478 674.2 873.4
Inventory turnover ratio 3.49 3.41 2.84 2.32
Period (in days) 104 107 128 157
10. Dividend payout ratio
Total dividend 15 15 108.68 114.15
Net income 231.7 27.6 164 217
Dividend payout ratio 0.06 0.54 0.66 0.53
(b) Analyze the performance, financial position and investment potential of both companies.
On the basis of above calculated ratios, performance of both companies ratios are
calculated which are interpreted below:
1. Current ratio:

2017 2018 2017 2018
Sports direct plc JD sports fashion limited
0
0.5
1
1.5
2
2.5
1.72
2.09
1.33 1.43
Current ratio
Current ratio
Analysis- On the basis of above chart, this can be find out that both companies are
unable to meet ideal criteria of current ratio that is of 2:1 times. In year 2017,
company had current ratio of 1.72 times which raised and became of 2.09 times.
While JD sports fashion limited had ratio of 1.33 times and 1.43 times for year 2017
and 2018. It shows that Sports direct plc has better current ratio as compared to JD
sports fashion limited.
2. Quick ratio:
2017 2018 2017 2018
Sports direct plc JD sports fashion limited
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0.81 0.86
0.68 0.72
Quick ratio
Quick ratio