Report- Zurich Plc|Financial Performance Analysis|Financial Management
Added on 2020-02-03
27 Pages5277 Words77 Views
FINANCIALMANAGEMENT ANDCONTROL
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INTRODUCTIONFinance is a key aspect of every business organisation which helps to produce production,operate in the industry. In the company if there are financial resources are not available then itcannot exists as well as sell products and services to the customers. In addition to this, it is verynecessary to manage and control over the financial resources by which business able to performwell and generate higher profit at the end of an accounting period. The current study is dividedinto two parts such as financial ratio analysis and investment appraisal techniques. In the part onefinancial performance of Zurich public limited company is to be analysed using financial ratios,which is operating in the manufacturing of office equipments and distributing in the market.Further, it shows limitations of financial ratio analysis for the company. In the second part itshows feasibility of project using financial tools and provide decisions to Johnson Limitedcompany. At the end, it focuses on critically evaluation of various investment appraisal methodsand source of finance.PART 11.1 Preparation of a report for the board of directors of Zurich Plc.In the current scenario management of the Zurich Plc wants to analyse its financialperformance in the industry. For that various types of financial ratios are to used and calculatedusing its financial statements. Such ratios are defined as below:Profitability ratiosThe ratio which helps to the company in order to determine position of its in the industryin terms of generating profit is identified as profitability ratios. Higher the values or outcomes ofsuch kinds of ratios indicates that the company is too much able and efficient for selling itsproducts and services for generates high level of profit (Brigham and Ehrhardt, 2013). There aredifferent profitability ratios are used by the management of Zurich Plc using income statement.These are like as gross profit, net yield as well as operating income. Various ratios of profit forthe Zurich Plc are computed as below:Table 1: Computation of profitability ratiosName of ratiosFormula2015 (in £000)2016 (in £000)Gross income738258253
Operating income25821783Net income972.84570.17Net sales1892016243Gross profit ratioGross income / net sales * 10039.02%35.86%Operating profit ratioOperating income / net sales * 10013.65%10.98%Net profit ratioNet income / net sales * 1005.14%3.51%Liquidity ratioAnother financial ratios and liquidity which shows ability of the entity in terms of meetwith the short term obligations which are taken from external financing sources. It includesmainly two kinds of ratios such as current and acid test or quick ratio. As the value of such ratioscomes higher, then it can be said that Zurich Plc performing well in the industry (Petty and et.al.,2015). Further, calculation of liquidity ratios for the entity Zurich Plc is as below:Table 2: Computation of liquidity ratiosName of ratiosFormula2015 (in £000)2016 (in £000)Current assets70066503Current liabilities24927.627528Inventory13201543Prepaid expenses00Current ratioCurrent assets / current liabilities0.28:10.24:1Quick ratioCurrent assets – (inventory + prepaidexpenses) / current liabilities0.23:10.18:1Gearing ratiosAs per the ratio it helps to the firm in order to determine level of long term debt that it hashow much debt as compare to the equity share capital. Apart from this it helps to know that firmis how much able pay cost of debt using operating profit in a fiscal year. Most widely used ratio4
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