Assignment on Investment Appraisal Method

   

Added on  2020-06-06

20 Pages4942 Words34 Views
MANAGERIAL FINANCE
Assignment on Investment Appraisal Method_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1PORTFOLIO 1.................................................................................................................................1Question 1...............................................................................................................................1A) Calculating financial ratios of two companies for two accounting periods i.e. 2015 and2016........................................................................................................................................1B) Analysing performance, financial condition and investment potential of Sports Direct andJD Sports firms.......................................................................................................................4C) Providing appropriate suggestions to the firm which has poor financial performance...11D) Discussing drawbacks of financial ratios which used to analyse firm's performance....11PORTFOLIO 2...............................................................................................................................12Question 2.............................................................................................................................12A) Use of basic investment appraisal methods and suggestions to management of a localmanufacturing enterprise......................................................................................................12B) Discussing limitations associated with investment appraisal technique for taking long-termdecisions...............................................................................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
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INTRODUCTIONFinance is considered as blood for every organisation because it helps to exist and operatein the industry. Due to unavailability of financial resources, an entrepreneur unable to establishits business in the market and sale products and services. The present project reflects about somemethods which help to assess financial information and make profitable investments. Formeasuring the business performance, two companies are taken into consideration i.e. SportsDirect International Plc. and JD Sports Fashion Plc. Both these firms operate in apparel industryand have a huge market presence. Further, using some financial ratios, financial condition,performance as well as investment potential are analysed. Under the second part of presentassignment, investment appraisal methods i.e. NPV, ARR and payback period are calculated forlocal manufacturing company. On the basis of these tools, suggestions to the management formaking fruitful investment are to be given. PORTFOLIO 1Question 1A) Calculating financial ratios of two companies for two accounting periods i.e. 2015 and 201620152016Name of financial ratiosFormulaSports DirectInternationalPlc.JD SportsFashion Plc.Sports DirectInternationalPlc.JD SportsFashionPlc.Current assets (CA)8782974002591311437510695Current liabilities (CL)382621326748540608348154Current ratios (CR)CA / CL2.301.222.431.47Current assets (CA)8782974002591311437510695Current liabilities (CL)382621326748540608348154Stock517054910247021581063361
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Prepaid expenses0000Quick ratios (QR)CA – (stock + prepaid expenses) / CL0.940.531.130.78Gross profit (GP)12408127395501284644884221Net sales2832560152225329043251821652Gross profit ratioGP / net sales * 10043.81%48.58%44.23%48.54%Operating profit (OP)83459264611137133406Net sales2832560152225329043251821652Operating profit ratioOP / net sales * 10010.44%6.09%7.68%7.32%Net profit (NP)24135353971278981100630Net sales2832560152225329043251821652Net profit ratioNP / net sales * 1008.52%3.55%9.61%5.52%Debt136849-374333063-247Equity capital11615513099911384728400825Gearing ratiosDebt / Equity capital16.5012.6623.889.55Profit available for equity shareholders24135353971278981100630Number of equity shares outstanding9798931.82707185.3613056310.83539157.1Earnings per Profit available 46.827.0640.6050.162
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