Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC

Running head: Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
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Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
Executive Summary:
This project is done to understand the concerns related to financial stability of all the 3
companies like Serco PLC, Capita PLC and Carillion PLC these are one of the biggest
company and the accountability of these companies impact the process in UK. The effect of
the insolvency filing of the Carillion PLC was a major disaster for the 40000 employees and
suppliers. They were affected by the liquidation. It is considered as the biggest financial
disaster in the history of UK. The amount of loss that this company impacted on all the
stakeholders was around 2 billion dollar. Thus an analysis of the debt and equity that the
company was having in the course of the action is analysis through this project.
The other two company is Serco Plc and Capita Plc that are used to analysis the financial
soundness for the a contract form NHS. The financial soundness shall be calculated by the
ratio analysis. The ratio analysis looks into factors that may make the decision making
process for the company easy.

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Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
Section A....................................................................................................................................4
Evidence based decision to ensure value for money:.............................................................4
Appreciation of counterparty risk in the procurement function:............................................5
Ratio analysis of Capita Plc:..................................................................................................6
Ratio analysis of Serco Plc...................................................................................................10
Decision to award the Contract............................................................................................13
Section B..................................................................................................................................13
About Carillion PLC:...........................................................................................................13
Funding Sources for the Carillion:.......................................................................................14
Financial Risk:.....................................................................................................................14
Ratio analysis of Carillion....................................................................................................16
Conclusion:..............................................................................................................................20
Referencing:.............................................................................................................................22

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Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
Introduction
The report is about the analysis of the ratios to understand the financial stability of the
company. The contract of NHS is to be awarded to the company with the best ratio
performance. There are two company betting for the contract Serco Plc and Capita Plc. The
contract will be given to the company that can manage the contract with least disturbance of
the finance.
The report also consists of the analysis of a giant company whose loss created a huge
impact on the whole country and specially the stakeholder. Carillion has recently filled for
liquidation (Altman 2000). The company is a construction and service based organization that
is specialized into field of Health, Transport, Justice, Immigration, Defense, and Citizens
Services. The company was not able to manage the cash inflow and outflow which led to
state of liquidation. The debt was almost around 2 billion which was the highest amount of
debt any company must have had in the history of UK. The report focuses on how the
situation led to liquefy the company and filled for insolvency (Ahmed Et al. 2016)
The report has been prepared to understand the lacks in the financial assessment and
the loss that the management done to the company due mis-management. The two company
capita and Serco is trying to get a contract that of NHS. So here the financial stability will be
analyzed.

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Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
Discussion
Section A
Evidence based decision to ensure value for money:
Value for money is a term that describes how nicely the return in investment is done.
The goods bought are for some value and the return that they might get will be equal or less
or more. Same goes for any governmental projects. The contract is an opportunity for private
and public companies to bid for this may give them a chance to expand and earn profit. It
involves major decision making for the public procurement of the contract. The research is all
about the formulation of the questions based on the project decision making. The forecasted
cost, return over the period of year and the duration to complete the project is also an
important factor for the estimation of the task.
The evidence based decision makings nothing but the procedure of back checking the
performance and credibility of the company. The ratio analysis is a method where the
companies ratios value over a period of years are compared and check. The comparison can
be done across the peer companies also. The ratio analysis is one method to do the evidence
based decision making. The other methodology that is by checking the past contract
completion reports and remarks. The evaluation of the contractor, supplier’s performance and
also the relationship between contractor and the supplier are evaluated (Jewell 2005).
NHS is a medical service system that has a procedure to mitigate the risk in the
contractual system. It is England based service provider that is affiliated to HSC that was
established in 1948. Each UK service system is operated independently and is politically
accountable to the relevant government. Thus it becomes the responsibility of the
government to check the contracts given to the companies. The contracts may be for

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Report on the Ratio Analysis of Serco PLC, Capita PLC and Carillion PLC
different purpose and it is of huge amount. Thus, the evidence based decision making is very
important.
Appreciation of counterparty risk in the procurement function:
Procurement risk is potential where the failure of a task process which is designed to
purchase services, product or resources may not be completed properly in the time frame
mentioned. The risk is of the loss of the confidence of the giver. Common types of risk are
fraud, cost, quality compromised, and time frame or delivery risk. So some times the risk of
procurement is considered as the compliance risk. The contract has a process of procurement
and thus the contracts are prone to risk. There is a risk of counter party appreciation are the
possibility of clients and sub-contractor not fulfilling their commitments. The subsidiaries
have the assess to the credit standing of the clients by accessing the financial position, past
experience and other factors that are relevant. The accountability of their advance payment,
credit letter and third party guarantees are a kind to mitigate the credit risk. The maximum
credit risk that can be allowed depends on the value of the trade and other receivables
(Edmister 2002).
To mitigate the risk of the supply chain management there is a best way:
 Diversify the suppliers
 Switching the suppliers
 Pile up
 Pre-payment.
All the method is used to cover the risk and mitigate the chances of faulty performance. This
is methodology to ensure a robust supply chain resilience for an accurate business process.
Sometimes the counterparty risk may arise from the financial transactions that takes place