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LSBM203 The Sports Direct International Plc
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London School of Business and Management
Managerial Finance (LSBM203)
Added on 2020-05-11
LSBM203 The Sports Direct International Plc
London School of Business and Management
Managerial Finance (LSBM203)
Added on 2020-05-11
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RUNNING HEAD: MANAGING FINANCEMANAGING FINANCE
MANAGING FINANCE1ContentsPORTFOLIO 1.........................................................................................................................................2INTRODUCTION.................................................................................................................................2COMPANY OVERVIEW.......................................................................................................................2SPORTS DIRECT INTERNATIOANL PLC............................................................................................2JD SPORTS FASHION PLC................................................................................................................3RATIO ANALYIS..................................................................................................................................3CONCLUSION...................................................................................................................................20RECOMMENDATION........................................................................................................................20LIMITATIONS OF RATIO ANALYSIS...................................................................................................21PORTFOLIO 2.......................................................................................................................................21LIMITATION OF INVESTMENT APPRAISAL TECHNIQUES..................................................................27REFERENCES........................................................................................................................................28
MANAGING FINANCE2PORTFOLIO 1INTRODUCTION This report will include the company overviews of Sports Direct International Plc. and JD Sports Fashion Plc. and the financial performance will be analysis for both the companies through interpreting ratios for years 2015 and 2016. The financial data will be extracted from the Balance sheet, income statement and the cash flow statement. The financial health will be determined for the purpose of assessing whether the investor should invest or not. This report will also provide conclusion. Further in this paper the recommendations of business performance improvement and the limitations of the ratio analysis is also given. COMPANY OVERVIEWSPORTS DIRECT INTERNATIOANL PLCThe Sports Direct International Plc is the largest and leading sports and lifestyle company in UK. The company was established in 1982. The company has diversified portfolio of clothing, footwear, equipment and accessories. The company has also expanded its operations in Asia, Europe and USA (Financial Times, 2017). It is operated through 4 business segments such as UK sports retail, International Sports retail, Brands and Premium lifestyle. Further it is also offers the range of products thorough SPORTSDIRECT.com and also licensed its brands to UK partners, continental Europe, America’s and The Far East (Yahoo Finance, 2017). It has also 32fitness gymnasiums. Approximately there are 757 stores in the world and around 18280 employees work together to serve the clients in order to attain the new level of excellence (Annual report and accounts, 2017). The CEO of the company is Mike Ashley and the chairman is Keith Hellawell.
MANAGING FINANCE3JD SPORTS FASHION PLCJD Sports Fashion Plc is a leading UK fashionable brand of multiple companies, own brand sports and casual wear. The company was established in 1981. The group has significant international brands such as Nike, Reebok, Puma and Adidas and also gained its image for being the most advanced merchandiser by keeping stylish ranges of sportswear. The group has expanded its business operations in other parts of the world such as Ireland, France, Spain, Germany, Italy, New Zealand and many more etc. Approximately the group has 1300 stores in the world and around 23584 employees work together (Bloomberg, 2017). The group has continued to grow organically by acquiring every year fashion brands store. The key people of the group are: Mr. Peter Alan Cowgill is the Chairman and Mr. Brian Small is the CFO of the group. Pent land Group Plc. is the holding company of the JD Sports Fashion Plc. Further the company is also offers the range of products thorough online portal named getthelabel.com (JD Sports Fashion Plc., 2017). The above two companies are competitors to each other. Thus, the performance of these two companies will be determined through Ratio analysis.RATIO ANALYISThe Ratio analysis is the best format to determine the financial stability of the companies by the individuals so that decisions of the investments can be taken accordingly. The companies are: Sports Direct International Plc. and the JD Sports Fashion Plc. are chosen for this task. Below are the ten financial ratios which will be computed for years 2015and 2016 and on the basis of ratios, recommendation will be given on the company which is more viable option to invest. 1.Current ratio: Current Ratio is the component of Liquidity ratio which determines the short-term viability and growth of the company. This ratio determines the company’s
MANAGING FINANCE4ability to meet the short-term obligations with the available short-term assets. The formula for the computation of Current ratio is: Current Assets/Current Liabilities (Tracy, 2012).Sports Direct International Plc.Amount ($)Particulars20162015Current Assets1311437.00878297.00Current Liabilities540608.00382621.00Current Ratio 2.432.30(Annual Report, 2016; 2015).Current Ratio 2.202.252.302.352.402.452.432.30Current ratio20162015JD Sports Fashion Plc.Amount ($)Particulars20162015Current Assets510695.00400259.00Current Liabilities348154.00326748.00Current Ratio 1.471.22(Annual Report, 2016; 2015).
MANAGING FINANCE5Current ratio1.101.151.201.251.301.351.401.451.501.471.22Current Ratio20162015Analysis: From the above current ratio table, it has been observed that current ratio of SportsDirect International Plc. is 2.43 in 2016 and 2.30 in 2015 whereas for JD Sports Fashion Plc. it was 1.47 in 2016 and 1.22 in 2015.Thus, the liquidity position of Sports Direct International Plc. is better in comparison to JD Sports Fashion Plc. 2.Quick Ratio: It is also called as Acid test ratio. Quick ratio is also a component of Liquidity ratio. In this ratio, Inventories are not included in the computation because inventories are not converted into cash in a short span of time. It also measures the short-term viability and growth of the company. The formula for computation of Quick ratio is: (Current Assets – Inventories)/Current Liabilities (Brigham and Ehrhardt, 2016).Sports Direct International Plc.Amount ($)Particulars20162015Current Assets1311437.00878297.00Inventories702158.00517054.00Current Liabilities540608.00382621.00Quick Ratio1.130.94(Annual Report, 2016; 2015).
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