Portfolio: Financial Ratios and Performance Analysis

PORTFOLIO

Table of Contents
Project A..........................................................................................................................................3
a. Financial ratios:........................................................................................................................3
b. Analyses of performance analyses...........................................................................................4
d. Limitation of Financial ration to interpret the company performance -..................................8
Portfolio 2......................................................................................................................................10
a. Investment appraisal technique..............................................................................................10
b. Limitations of investment appraisal techniques in long term decision making:...................10

Project A
a. Financial ratios:
Current Ratio 2018 2019
M&S 2.1 1.9
Next Plc 1.98 1.99
Quick Ratio
M&S 1.04 0.98
Next Plc 0.55 0.86
Net Profit Margin
M&S 84% 56%
Next Plc 74% 86%
Gross Profit Margin
M&S 78% 45%
Next Plc 65% 76%
Gearing Ratios
M&S 2.5 1.9
Next Plc 0.86 0.75
P/E ratio
M&S 45% 23%
Next Plc 47% 58%
Earnings per share
M&S 0.87 0.54
Next Plc 0.59 0.89
ROCE
M&S 0.24 0.36
Next Plc 0.36 0.54
Average inventories
turnover period
M&S 58 64
Next Plc 128 112

Dividend pay-out
ratio
M&S 36.00% 28.00%
Next Plc 12.00% 9.00%
b. Analyses of performance analyses
Current Ratio
The current allocation, also known as a working capital allowance, measures the company's
ability to cope with defaulting liabilities with existing resources. Conventional facilities are
mobile assets that can be converted into cash within a year such as cash, cash in kind, credits,
mobile stores, and attractive protections. Current liabilities refer to corporate loan commitments
due within one year.
Clearly, a higher average share is better for the industry. A reasonable average allowance ranges
from 1.2 to 2, which means that the industry has current resources many times its responsibilities
to cover its obligations. A standard allowance of less than 1 means that the organization needs
more mobile resources to cover their mobile responsibilities. A 1: 1 ratio indicates that current
resources are on par with current responsibilities and that the industry is only ready to meet its
commitments.
Quick ratio
The Fast Ratio, also known as the Acid-Test or Liquidity Ratio, measures a company's ability to
pay off its interim debt by obtaining resources that are easily repurchased for cash. These funds
are primarily cash, hedge funds and accounting credits. These funds are called "quick" funds
because they can be quickly converted into cash. A quick installment is an indication of an
organization’s ability and inability to pay for its current commitments. Financial backers,
providers and moneylenders are increasingly interested in finding out if a company has enough
money to pay off its huge debts instead of when it doesn't. Having a share of net liquidity is an
indication of the sustainable business potential and performance that can drive sustainable
development (ZEWDE, 2017).
Net profit margin