Royal Mail Performance and Brexit Impact

This assignment analyzes Royal Mail's financial performance in comparison to FedEx, highlighting the challenges posed by Brexit. Ratio analysis reveals a declining trend in Royal Mail's performance, attributed to factors such as the weakening British Pound and new regulations imposed by Brexit. The report also explores the international issues affecting Royal Mail, including decreased market value and the impact of Brexit on its operational capabilities.

INTERNATIONAL
FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
Background..................................................................................................................................3
International financial statements................................................................................................4
Sources of finance......................................................................................................................10
Management strategy.................................................................................................................11
Financial comparisons...............................................................................................................11
Capital structure theory..............................................................................................................11
Dividend policy..........................................................................................................................11
International effects on the business decisions..........................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Role of an entity gets increases by using various sources of finance in order to expand the
current market share. Royal mail has been selected for the given project report in which
important finance has explained by determining its current performance through ratio analysis.
This report stresses on introducing capital structure theory and dividend policy should adopt by
an entity.
Background
Royal mail Plc is selected for the given project which deals in providing postal services
to variety of customers locate in the external business environment. This is public limited
company established with the support of the government of the United Kingdom in order to
facilitate different kinds of customers by offering variety of postal related services. Royal mail
UK is a group which includes several brands operated under the name of this particular group
such as Royal mail and parcel-force systems in order to deliver parcels of the customers to their
relatives or friends (Gilpin, 2016). This is an important international logistics company deals in
providing postal related services in order to create a good chain of communication among
different customers which can be normal individuals or business corporate who deliver important
information from one medium to another in achieving their desired aims and the objectives. This
kind of company offers mail collection services and parcel delivery services all over the UK to
facilitate its variety of customers exists in the UK. This entity is registered with recognize stock
exchange that is London stock exchange with the FTSE 100 constituent indexes. There is
minimal share of 30% stake of the government in the royal mail which helps an entity in order to
improve the overall performance of an entity in the external business environment.
FedEx is another important organization located in the United Kingdom exists in the
same logistics industry in order to deliver parcels and mail in all across the world. The deficiency
of Royal mail is that it delivers all kinds of postal services throughout the UK bit this
organization extends its overall market by expanding its external market share in order to grab
higher market advantage in achieving desired aims and the objectives within a give period. The
desired aim of the business is to accomplish all the aims and targets in less amount of time.
Timely delivery of all the parcel is the unique feature of an entity.

International financial statements
Financial statements prepared by an entity in order to ascertain the financial performance
of an entity as desired aim's and the objectives of the business concern is bet all the external
market customers by offering all kinds of services in order to grab higher market advantage.
International financial statements prepared by an entity by following international reporting
standards in order to comply all the external market regulations in improving current
performance of an entity within a given period. Role of IFRS has increases with the increasing
external market complexities which imposes burden on an entity in adopting different rules and
regulations in considering all the external market changes in the business of an entity. With the
increasing trend of globalization, various accounting standards need to be adopt by an entity in
order to increase the reliability and understanding of all the financial information included in
different financial statements prepared by an entity (Gallizo, Moreno and Salvador, 2016). Books
of accounts prepared by an entity according to all the accounting standards which improves the
overall financial accuracy of all the information included in the financial transactions in order to
grab higher market advantage in the external business environment which is essential in order to
adopt various IAS in uplifting current business conditions of an entity. International accounting
standards committee come into existence in order to test the ability of an entity in considering
external market changes in the existing business performance of an enterprise.
Financial ratios
Particulars Formula 2015 2016
Profitabilit
y ratios Royal Mail Fed Ex Royal Mail Fed Ex
Net sales 9328 47453 9251 50365
GP 9328 30469 9251 33038
GP ratio
GP/Net
sales*100 100.00% 64.21% 100.00% 65.60%
NP 325 1050 £241.00 1818
NP ratio NP/Net 3.48% 2.21% 2.61% 3.61%

sales*100
Fed Ex Fed Ex
2015 2016
0
0.2
0.4
0.6
0.8
1
1.2
Profitability ratios
GP ratio
NP ratio
Interpretations
Profitability ratios determined by an entity in order to assess the financial accuracy of the
business in a particular financial year as income statements are evaluated in order to ascertain the
profit of an entity within a year. It is classified into two important ratios such as gross profit and
net profit which is regarded as one of the important profit earned by an entity in a financial year.
Gross profit- Gross profit is the raw amount of profit generated by n entity within a particular
financial year after excluding cost of sales from the sales and the revenue produces by an entity
in a year (Bodea and Hicks, 2015). In the above comparison the performance of Royal mail is
compared with the same sector entity exists in the logistics industry that is FedEx. GP ratio of
Royal mail is higher as compared to the Fed Ex is 100% which is not good at all as due to lav of
cost of sales incurred in an entity its performance remains the same from 2015 to 2016. On the
other hand, performance of FedEx has increases from 64% to 65%.
Net profit- In corporate world this is regarded as the ultimate or final output generated by an
entity after paying all kinds of operating expenses incurred in an entity. This profit produces by

an entity shows the burden of taxation imposes on an entity which will gets increased or
decreased with the passage of time. Net profit of Royal mail is decreases as compared to the
current performance of FedEx. It is clearly evident from the above comparison that burden of
taxation is higher which suppresses overall capability of an entity within a particular time period.
Liquidity
ratios
Current
assets 1349 10941 1459 11989
Current
liabilities 1938 5957 1968 8008
Current
ratio
Current
assets/curre
nt liabilities
0.69607843
14
1.83666274
97
0.74136178
86
1.49712787
21
Inventory 20 498 21 496
Quick
assets
Current
assets-
inventory 1329 10443 1438 11493
Quick ratio
Quick
assets/curre
nt liabilities
0.68575851
39
1.75306362
26
0.73069105
69
1.43518981
02

Royal mail Fed Ex
2015 2016
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Liquidity ratios
Current ratio
Quick ratio
Interpretations
An entity need to emphasises on their current liquidity position on the internal business as
this is essential in order to meet all kinds of short term complexities included in the business
such as trade creditors included in the business. It includes current ratio which determines the
proportion among current assets as it is important for an entity in order have strong current assets
in order to handle all kinds of current liabilities included in the business. Current ratio of Royal
mail is increasing as compare to the FedEx which shows an entity's ability in achieving all kinds
of goals and the objectives (Gilpin, 2016). On the other quick ratio shows the efficiency of the
current assets after excluding inventory component as this inventory will not convert into liquid
assets. The quick ratio of Royal mail is again higher than compared to the FedEx which can be
said that this entity's current liquidity position is higher which helps in achieving desired aims
and the objectives.
Capital
structure
ratios
Debt 366 7249 392 13838
Equity 3837 14993 4458 13784
Debt to Debt/Equity 0.09538702 0.48349229 0.08793180 1.00391758

equity ratio 11 64 8 56
Royal mail Fed Ex
2015 2016
0
0.2
0.4
0.6
0.8
1
1.2
Capital structure ratios
Debt to equity ratio
Interpretations
Debt to equity ratio is one of the important ratio in order to evaluate the overall capital
structure of both the entities such as Royal mail and FedEx. It is essential for an entity in order to
balance the overall capital structure of the business in order to maintain adequate balance in the
business organization of Royal mail and FedEx whose responsibility gets increases wit the
passage of time as their major aim is to accomplish all the aims and the objectives. Debt to
equity ratio shows the proportion of debt and equity in the business as external market debt will
be compensated by higher equity included in the business. The performance of FedEx is better as
compared to the Royal mail as this shows higher included debt component as compared to th
internal source of equity in the business.
Efficiency
ratios
Trade
receivables 873 5719 942 7252
Receivables
collection
Net sales/trade
receivables
10.68 8.29 9.82 6.94

period
Inventory 20 498 21 496
COGS 9110 16984 9116 17327
Inventory
turnover
COGS/
inventory*365 455.5 34.10 434.09 34.93
Fixed asset 5642 26128 6141 34075
Fixed asset
turnover
Fixed
asset/turnover 0.60 0.55 0.66 0.67
Fed Ex Fed Ex
2015 2016
0
50
100
150
200
250
300
350
400
450
500
Efficiency ratios
Receivables collection period
Inventory turnover
Fixed asset turnover
Interpretations
Major aim of efficiency ratios is to analyze the current financial resources as their desired
aims is to accomplish all the aims and the objectives within a given period. The efficiency of an
entity will be improved with the passage of time in improving existing business performance of
the concern.
Receivables turnover-This kind of approach used by an entity in order to determine the
efficiency of an entity in order to collect revenue from all the debtors of an entity within a given
time period in accomplishing desired aims and targets. It is better to have lower receivables
turnover as an entity will collect money from all the debtors in less period that will be beneficial

for an entity. It can be seen from the above figures that receivables turnover ratio is decreases for
both Royal mail and FedEx shows the ability of an entity in order to grab higher market.
Inventory turnover- This kind of approach determines the usage of all the inventories
repetitively in an entity that helps in increasing sales and the revenue of an entity in order to grab
higher market advantages in the external business environment (Gilpin, 2016). Inventory
turnover of both the entity is decreases from one period to another that shows inventories are less
used in the business process in order to generate higher amount of sales and the revenue
generated by an entity within a particular time.
Fixed asset turnover- This ratio assesses the non-current asset of an entity by analyzing the
overall relationship of a particular asset n generating higher amount of turnover in a particular
financing year. Role of fixed assets is higher in an enterprise as this kind of assets remains in the
business for long period in order to grab higher market advantage in the external business
environment. The efficiency of Royal Mail and FedEx has increases from one period to another
that depicts the higher ability of an entity in accomplishing desired aims and the objectives. The
efficiency of an entity signifies the higher efficiency of an entity in order to achieve higher
specialization in the external business environment.
Sources of finance
Both entity will choose internal and external source of finance in order to accomplish
desired aims and targets within a given period. Finance plays a significant role in the business as
his is regarded as the essential source that boost the current level of an entity in improving
performance of an entity.
Equity finance select by an entity which is regarded as the important source of finance
that keep all the money in the business till the wound up of the business which increases the
current business strength of the corporation (Lewis, 2015). In this kind of finance, dividend will
be paid by n entity all he existing shareholder’s in order to retain all the shareholder’s within the
same entity for long period.
Debentures is another important source of finance essential for an entity in order to get
higher competitive advantage in the external business environment in order to capture higher
market share in the external business environment. This is regarded as nth cheapest source of
finance in which coupon rate of interest will be paid by an entity to all the lender who provide

specific amount of loan to an entity which is essential for an entity in order to grab higher market
advantage in the external business environment.
Management strategy
Top management of Royal mail includes higher customer's satisfaction level will get
increases with the passage of time which helps in boosting existing efficiency of the firm. The
current strategy will include offering quality oriented services by delivering all the mails and
parcels safely from one end to another end. The postman who deliver all the parcels and mails
are customers friendly who adopts flexible approach in order to facilitate various customers by
satisfying all their needs and the expectations in order to increase their current brand value in the
external business environment.
Financial comparisons
Bench marking- It is that kind of approach in which best practices of the logistics industries will
be followed by royal mail in order to increase their current capabilities (Johnson, McLaughlin
and Haueter, 2015). This will inspire all the individuals working in an entity in order to improve
their existing efficiency in order to fulfill all their needs and higher expectations. In the given
case scenario, higher financial standards in terms of financial ratios of FedEx company will
become financial benchmarks for an entity which needs to be surpass in order to break the
existing record and rebuild their brand image in the external business environment.
Capital structure theory
Net income approach will be recommended to the Royal mail as in this particular
approach the cost of debt and equity are not affected with the capital structure of an entity as they
are independent of the current capital structure. The overall value of the firm will get increases
when weighted average cost of capital gets declined with the passage of time.
Dividend policy
Royal mail should adopt Gordon's growth model which is important method of
determining the dividend which will be paid to all the shareholder’s of an entity. It is regarded as
the best suitable approach as in this way external growth will be used to provide deserving
dividend to all the shareholder’s which can be decreases or increases with the passage of time
and will not create any kind of negative effects on the external shareholder’s.
= EPS/MPS+g

= 41.30/417.90+ 5.29%
=15.17%
Source: (Royal Mail Plc, 2016. Available through: <http://www.hl.co.uk/shares/shares-search-
results/r/royal-mail-plc-ordinary-gbp0.01> [Accessed on 26th April 2017].)
International effects on the business decisions
Due to decrease in the currency value of Pound Royal mil has faced declined in the
current volume of parcel deliveries in the china market which is one of the important market
segment in the international markets where an entity deals by offering its variety of services to its
different set of customers.
Royal mail blamed BREXIT for reducing the overall volume of letters and parcel
deliveries with the imposition of various rules regulations will affect the financial performance
of an entity (Passari and Rey, 2015). Major aim of the business is to expand its current business
in all cross the world but due to contractions created by BREXIT it declines current performance
of an entity while offering variety of services to all its customers in the external business
environment.
CONCLUSION
It can be concluded from the above assignment that ratio analysis used by an entity
revealed that performance of royal mail is decreasing as compared to the current performance of
FedEx. International issues faced by an entity includes decreasing value of Pound in the
international markets and interference of BREXIT in reducing current ability of Royal mail by
imposing various rules and the regulations.

REFERENCES
Books and Journals
Chwieroth J.M., 2015. Managing and transforming policy stigmas in international finance:
Emerging markets and controlling capital inflows after the crisis. Review of International
Political Economy. 22(1). pp.44-76.
Bodea C. and Hicks R., 2015. International finance and central bank independence: Institutional
diffusion and the flow and cost of capital. The Journal of Politics. 77(1). pp.268-284.
Gallizo J.L., Moreno J. and Salvador M., 2016. Banking Efficiency in the Enlarged European
Union: Financial Crisis and Convergence. International Finance. 19(1). pp.66-88.
Gilpin R., 2016. The political economy of international relations. Princeton University Press.
Lewis W.A., 2015. The evolution of the international economic order. Princeton University
Press.
Shim J.K. and Constas M., 2016. Encyclopedic dictionary of international finance and banking.
CRC Press.
Johnson C.J., McLaughlin J. and Haueter E.S., 2015. Corporate finance and the securities laws.
Wolters Kluwer Law & Business.
Hale G. and Obstfeld M., 2016. The Euro and the geography of international debt flows. Journal
of the European Economic Association. 14(1). pp.115-144.
Passari E. and Rey H., 2015. Financial flows and the international monetary system. The
Economic Journal. 125(584). pp.675-698.
Online

Steil E., 2015. International Finance. [Online]. Available through:
<http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1468-2362> [Accessed on 26th April
2017.]
Royal Mail Plc, 2016. Available through:
<http://www.hl.co.uk/shares/shares-search-results/r/royal-mail-plc-ordinary-gbp0.01> [Accessed
on 26th April 2017]