Finance and Economic Literature Review

This assignment requires a review of academic literature related to finance and economics. Students need to analyze various books, journal articles, and online sources to understand key concepts, theories, and empirical findings in the field. The review should demonstrate a critical understanding of the literature and its relevance to current debates and research trends.

FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Company performance and its Background............................................................................3
2 .Various Ratios and their calculation.......................................................................................4
Ratio calculation of Morrison supermarket plc...........................................................................5
3. The performance of the Morrison company to the investor with the above ratios.................7
CONCULSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The project report is about the assessing the performance of the Morrison (Wm)
Supermarkets PLC company which is situated in London. The purpose of the financial data
analysis is done through the various financial activity of the company. It covers all the Ratios
analysis with the motive to examine the group and ability to assess the performance of the
company(Arcand, Berkes and Panizza., 2012). The report also analysed the financial statement
by using the balance sheet of the company with taking the at least three years of the data. On the
basis of the Analysis the certain interpretation have been done to take the idea of the investment
decision for the company . On the basis of the all the findings and the analysis a annual report is
being prepare to see the overall impact of the finance on the company performance. The concern
investor have made their decision by taking the shareholders comments.
TASK 1
1. Company performance and its Background
Wm Morrison is one of the supermarket plc which is dealing in the Morrison. It is the 4th
largest supermarket in the united kingdom behind sainsbury and Asda. It is established in 1899.
the location of the stores where mostly in the north of the England,but now it has switch in the
south wards also. In the 2016 its has 498 superstores across the England. The history of the
Morrison is starts with the opening of the small shop in the city centre. It was as self service
shop,the company first open its supermarket as Victoria with the variety of the product have the
pleasant price to it. The program for the conversion of the store to safe way to the Morrison was
the largest in the retail history(Bakand, Hayes and Dechsakulthorn., 2012). In the 2005 the
Morrison started to close the safe ways which is the premises was 50-50 among both of them.
The traditional structure of the Morrison supermarket is known as the market street . In the 2012
the company is come under the retail website with the name Morrisons cellar through which
wine were sold around the world with the expansion of the market.
2 .Various Ratios and their calculation.
Ratio : it refers to the relation between the two different numbers of the times of the value
is contain and the other contained inside the others. It is basically the comparision between the
two different variables in the percentage form.

There are various ways or methods to calculate the ratios for the financial statement. Under this
report the annual report of the Morrison company is being taken into accounts(Billio and et. al.,
2012). The ratios follows as:
1. Profitability ratio : It is way of financial calculation which is used to assess the growth
of the company through generating maximum earning by comparing its expenses and the
cost incurred for the time period(Brealey and et. al., 2012).
It is based on the judgement of the company on the investment part regarding the level of the
company resources and the assets. It comprise of the certain ratios:
 Gross Margin ratio
 Profit margin
 return on assets
 Return on capital employed
 return on the equity(Buera, Kaboski and Shin., 2011).
To calculate return on capital employed:
= Net profit/ capital employed.
To calculate operating profit :
= Operating profit/sales
To calculate Gross profit margin :
= Gross profit/sales
2. liquidity ratios: It refers to the relationship between the company assets and the
liabilities(Kotz, Kozubowski and Podgorski., 2012) . It is very helpful for the company
because, it gives the company an idea about the company ability to pay the long term and
the short term liabilities . The profitability of the company is mostly depend on the
liquidity position of the company that whether the company is going to pay off their debts
. It also comprises of the following:
1. current ratio.
2. Acid test ratio.
To calculate the current ratio:
= current assets/current liabilities
To calculate the acid test ratio :
= Liquid assets(current assets-stock) / current liabilities

3. Efficiency ratios : It explain about the company is going to used its assets and the
liabilities in the internal level. It can be calculate through the turnover of the
receivables ,payment of the liabilities and the use of the equity and the
stock(Mandelbrot., 2013). It is calculate through following
settlement period for the trade payables:
= Trade creditor/cost of sale*365
settlement period for the trade receivables :
= credit sales/Total receivables*365
stock turnover : = Cost of goods sold/Average receivables
4. Market Ratio : It is the process through which the investors are reacts to owing the
company inventory and the cost incurred on the issues of the stock. It is best way to know
the amount of return from the investment to the shareholder in the Morrison
stocks(Minsky., 2015).
It is calculate through the following:
 Earning per share :
= Total net income/shares outstanding
 price earning ratios:
= Market value per share/ Earning per share
Ratio calculation of Morrison supermarket plc
Particulars Formulas 2014 2015 2016
Profitability Ratio
Gross Profit 1074 761 617
Operating profit -176 -909 242
Net profit -238 -761 222
Revenue 17680 16816 16122
Capital employed 7172 6102 5759
Gross profit margin Gross profit/Sales 0.0607466063
0.0452545
195
0.0382706
86
Net profit margin Net profit/Sales -0.0134615385
-
0.0452545
195
0.0137700
037

Operating profit margin Operating profit/Sales -0.0099547511
-
0.0540556
613
0.0150105
446
Return on capital
employed Net profit/capital employed -0.0331846068
-
0.1247132
088
0.0385483
591
Liquidity Ratio
current assets 1430 1144 1308
current liability 2873 2273 2747
Current ratio
current assets/current
liability 0.4977375566
0.5032996
04
0.4761558
063
liquid assets 578 486 692
inventory 852 658 616
Acid test ratio
liquid assets/current
liability 0.201183432
0.2138143
423
0.2519111
758
Efficiency Ratio
cost of goods sold 16606 16055 15505
Average receivable 266 254.5 373.5
stock turnover
cost of good sold/average
receivable
62.428571428
6
63.084479
3713
41.512717
5368
market ratio
Earning per share
Net income/average
outstanding shares 845 -310 699
Efficiency ratios
trade payable 1501 1436 1397
settlement period for Trade creditor/cost of 32.991990846 32.646527 32.886488

payables sale*365 7 5615 2296
3. The performance of the Morrison company to the investor with the above ratios.
Income statement of the company from consecutive year 2014/2015/2016
As the company is wm Morrison supermarket PLC had revenues loss from16816bn to 16122bn
from the last two year of the annual report(Reshef., 2012). The company is grew its net income
from the last year from (4.53)% to +1.38% . A reduction in the general administrative cost and
selling of the sales from 1672bn to just 472bn. But there is a comparative growth in the net
income despite in the downfall in the revenues. The operating profit of the Morrison company is
also increase from the last year of the margin from (5.45)% to 1.50% which is the most
important part of the company that must be kept the mind while investing the amount in the
company.
Data interpretation
From the above income statement the investor who is going to invest the amount of 1 million
into the Morrison company can see that the income statement of the company is that must
sufficient enough to take the decision of the investment .
 The net profit margin of the company is just 1.38% in 2016, it is continuously fluctuating
from the previous years(Philippon.,2012). But it is the positive in for the purpose of the
investment.
 The operating profit margin for the investor is under the control because of the increase
with the 1.50% in 2016 which means that the company is investing more on the expenses
which will sometimes create big impact on the company to grow further.
 The next thing is the Return on the capital employed is also good enough if the investor
invest into the company because, it seems that it is less risky due to which it gives more
return to the investor.
Balance sheet of the company as on the year 2014/2015/2016
the balance sheet of the wm Morrison company is showing various change in the cash position
and the liquidity portion of the company. The major part of the company is that it is enough to
pay off its debts . The any outstanding liabilities can make the company shrink into the market .
According to the balance sheet of the company the position of the total assets is less as compare
to the amount of liabilities the company is carrying. It was observed that they is a continuous

change in the amount of the liabilities from the previous years. Earning per share from the stock
position is not so accountable because it just having the negative response from the last two year
of the company statements.
For the investment purpose
the invest have to be very much sure from the mindset that the company Morrison is not
performing well enough from last two years. but it is made an impact in the current year with the
positivity in the net revenues and the income for the company. If the invest is going to invest in it
then he must have very much sure about the impact of the return from it.
 The current ratios of the company is from the last three years is recorded as 0.49 in
2014,0.50 in 2015 and 0.47 in the 2016.it is clearly indicate that the current ratio is less as
compare with the previous two years.
 The next important thing is the acid test ratio of the company which is 0.20 in 2014, 0.21
in 2015 and 0.25 in the year 2016 which little bit at the highest side of the company
needs(Morrison (WM) Supermarkets PLC, 2017). That must be the range of the company
in the expansion of the projects.
 The settlement period of the credit payable is also taking minimum 30 days , which again
is the huge benefit for the investors to decide the company is going to generate maximum
profit for the business.
 The market ratios are enough to indicate the investor any kind of growth opportunity that
they want to go for the investment in the Morrison supermarket plc or not
As the shareholder of the company the suggestion to the investors on the basis of the above
financial ratios the data analysis is shows that the idea for the investment of the 1 million into
our company is sufficient enough so that it will benefit the company into the future time
period(Tresch., 2014). The decision are mostly need to be taken quickly. The decision are always
risk but it will not move forward unless you can not take the risk. According to the above
statement the ratios are clearly indicating the investors that they can invest in the Morrison
supermarket plc and make the company to become more profitable in the future prospect of the
market conditions. The unit of the ratios must be taken into consideration so that the amount of
the 1 million can be waste from the investor under the Morrison plc.

The strength of the company is that it is generating the profit at the continuous basis from the
last three years for the company. All those main point must be taken by the investor to take the
comparative advantage from the company.
The strategic analysis on the basic of the ratios and the statements.
Market size :
 From the above market ratio 0.69 the market is growing at the speed in the current
situations.
 The amount of 1 million investment is more beneficial for the company because of the
market condition established in the areas of the united kingdom.
 The another stage is that the market is growing with the positive rate at the 20-25 %
growth every year(Tirole., 2010).
 According to the market condition the 12.8% of the total amount of 1 million can be
invested in the groceries which is the third most essential product of the household which
are spending on the housing and the transportation cost of the company Morrison plc.
Market structure:
 The supermarket is contributing 3% to the London stock exchange in the FTSE250 index
with the market capitalization .
 On the basis of the financial analysis the top most company of the UK like sainsbury
tesco, asda and the Morrison is contributing 79% of the market share to the country.
Customers
It is about the customer base that what they want from the market and the understanding the
market situations regarding the price and the position of the current scenario related with the
ratio of the company(Thaler., 2010).
The growth in the earning of the company is to generate the growth per share which is fell -60%
while the price earning ration is the increase from the last two years . It is measured on the three
year basis the dividend per share is down from average industry relative to the other peers. but
the earning per share is the line according to the industry average growth of the company.
From the above all the calculation and the discussion the following strength and the
weakness of the report is beaning analysed.

 Its been observed that the investors have the important point to invest in the equity of the
company because the the position of the share in the market are safe from the statement
of the Morrison supermarket plc.
 The another important idea to the investor the market share of the company are properly
operated and because it the top most company of the UK in the retail store the image and
the loyalty of the customer ans the shareholder are been the basic responsor of the
investment(Shleifer and Vishny., 2011).
 The stock turnover ratio is the major criteria for the investor that it should be controlled
enough in the hand of the company at the regular basis.
 Another important analysis of the investor which is going to be focused is on the liquidity
part that is under the control of the company ,because fro any of the company or the
financial institution before investing into the company they want to check the liquidity
position of the company they the company is able to pay off the debts on the account or
not(Roberts and Whited., 2012).
CONCULSION
This is to conclude that the company is also being desirable because it will help the
investors to check the development and growth of the company in the by paying the investors
and the shareholder the margin of the profit. They share can be distributes according to the
partners or the investors as the ratios mentioned in the contract of the company act.
So, as a shareholder of the Morrison supermarket plc I can assure to you that you can welcome to
invest in the our company because after seeing all the impact and effect in the annual report of
the company you have create the mindset that our company is well enough to meet the business
properly. Our liabilities are paid on the timely basis and the most important part is that the Net
income of the company is good enough to make the payment of the dividend to the members and
the investors . The market share of the company is also under the control of the stock exchange
limit . The price of outcome is to be generate with the investment of the 1 million as the growth
purpose .

REFERENCES
Books and Journal
Arcand, J.L., Berkes, E and Panizza, U., 2012. Too much finance?.
Bakand, S., Hayes, A and Dechsakulthorn, F., 2012. Nanoparticles: a review of particle
toxicology following inhalation exposure. Inhalation toxicology.24(2). pp.125-135.
Billio, M., Getmansky, M., Lo, A.W and Pelizzon, L., 2012. Econometric measures of
connectedness and systemic risk in the finance and insurance sectors. Journal of
Financial Economics.104(3). pp.535-559.
Brealey, R.A and et. al., 2012. Principles of corporate finance. Tata McGraw-Hill Education.
Buera, F.J., Kaboski, J.P and Shin, Y., 2011. Finance and development: A tale of two
sectors. The American Economic Review.101(5). pp.1964-2002.
Kotz, S., Kozubowski, T and Podgorski, K., 2012. The Laplace distribution and generalizations:
a revisit with applications to communications, economics, engineering, and finance.
Springer Science & Business Media.
Mandelbrot, B.B., 2013. Fractals and Scaling in Finance: Discontinuity, Concentration, Risk.
Selecta Volume E. Springer Science & Business Media.
Minsky, H.P., 2015. Can" it" happen again?: essays on instability and finance. Routledge.
Philippon, T and Reshef, A., 2012. Wages and human capital in the US finance industry: 1909–
2006. The Quarterly Journal of Economics.127(4). pp.1551-1609.
Roberts, M.R and Whited, T.M., 2012. Endogeneity in empirical corporate finance.
Shleifer, A and Vishny, R., 2011. Fire sales in finance and macroeconomics. The Journal of
Economic Perspectives.25(1). pp.29-48.