Managerial Finance: Financial Analysis of Marks and Spencer Plc and Next Plc

Managerial Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1................................................................................................................................3
Ratio analysis:..............................................................................................................................4
Interpretations:.............................................................................................................................8
Recommendations:....................................................................................................................13
Limitations for using ratio analysis for knowing firm’s financial position:..............................14
PORTFOLIO 2..............................................................................................................................14
Investment appraisal techniques for project A and project B:...................................................14
Limitations of using investment appraisal techniques for long term decision-making:............18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................22

INTRODUCTION
Managerial finance aids in corporate decision-making because it has a direct impact on
an organization's income, losses, cash flows, including generating revenue. This makes a major
contribution to a corporation 's total growth (Li,., Niskanen and Niskanen, 2019.). The report
offers a financial analysis of UK's leading retail supermarket chain corporations namely Marks
and Spencer Plc and Next Plc, along with recommendations for corporations. This also
comprises practical case analysis on investments appraisal approaches as well as the major flaws
in these approaches.
PORTFOLIO 1
Overview of Companies:
Marks and Spencer Plc: With approximately 400 company-owned company M&s stores within
the domestic market, M&S plc is major retailer in UK. Clothing, accessories, toys, home
furniture and foods are all sold in stores, with large range of products being sold through M&S's
private-labeled St Michael brand. Close to 100 extra Marks & Spencer shops are owned and
operated by the corporation in the Europe, Hong Kong as well as Canada, also 85 M&s shops are
franchised in Europe, Far East, Middle East, Australia, Bahamas including Bermuda. Marks and
Spencer plc also operates Brooks Brothers named men's clothing shopping chain, which has over
170 locations in US and Japan, as well as Kings Super Markets food stores chain, that has 20
locations in the New Jersey. M&S Financial Services offering credit cards, private loans health
insurance including savings, retirement, and pension funds to its clients. Outside of United
States, M&s generates around 17% of its sales (Felix and von Eije., 2019).
Next Plc: The first outlet of NEXT supermarket chain started in Feb. 1982, with exclusive
coordinated line of trendy dresses, shoes, including accessories for ladies. In year 1999, online
shopping being launched, and the whole book became accessible to buy from, section by section,
on internet – a further first in UK. Currently, NEXT has over 500 outlets in the United Kingdom
and Ireland, as well as about 200 outlets in 40 nations around the world Several larger scale
apparel and home outlets have launched in the UK in recent years. NEXT has five sections:
NEXT Retail, that has around 330 stores across UK and Ireland; while, NEXT Directory, that
also has an e-commerce channel; NEXT Overseas, that has franchise agreements across United
States, Asia, Mainland Europe, and Middle East; as well as Ventura, that runs financial services

division. Land management as well as telecommunications software support services are two
other operations.
Ratio analysis:
Ratios Mark and Spenser PLc (GBP in Million)
Year 2018 Year 2019
Current ratio
Current Assets 1318 1490
Current Liabilities 1826 2228
Current assets / Current
liabilities
0.721796276 0.668761221
Quick ratio
Quick Assets 537 790
Current Liabilities 1826 2228
Quick assets/ Current
liabilities
0.294085433 0.354578097
Net profit ratio
Net Profit 26 34
Sales 10698 10377
Net profit/ Sales*100 0.243036082 0.327647682
Gross profit ratio
Gross Profit 4047 3830
Sales 10698 10377
Gross profit/ Sales *100 37.82950084 36.90854775
Gearing ratio
Total Debts 2768 2291
Capital Employed 5724 4972
Total debt / Capital
employed
0.483577918 0.46078037
P/E ratio
Market value per share 2.7466 0.9296

Earnings per share 0.02 0.02
Market value per share/
Earning per share
137.33 46.48
Earnings per share ratio
Net Profit 26 34
No. of outstanding shares 1716 1702
Net income/ Number of
outstanding share
0.02 0.02
Return on capital employed
Operating Profit 671 601
Capital Employed 5724 4972
Operating profit/ Capital
employed
11.72257163 12.08769107
Average stock turnover
Cost of goods sold 6651 6547
Average stock 770 740.5
Cost of goods sold/ Average
stock
8.637662338 8.84132343
Dividend pay-out ratio
Dividend Pay-out 0.18 0.18
Earnings per share 0.02 0.02
Dividend per share/ Earning
per share
900 900
Ratios Next Plc
2018 2019
Current ratio
Current Assets 1798 2032

Current Liabilities 915 1113
Current assets / Current
liabilities
1.96502732 1.82569632
Quick ratio
Quick Assets 1214 1437
Current Liabilities 915 1113
Quick assets/ Current
liabilities
1.32677596 1.29110512
Net profit ratio
Net Profit 592 590
Sales 4056 4155
Net profit/ Sales*100 14.5956607 14.1997593
Gross profit ratio
Gross Profit 1356 1462
Sales 4056 4155
Gross profit/ Sales *100 33.4319527 35.1865223