LSBM203 The Sports Direct International Plc

Added on - 10 May 2020

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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 1INTRODUCTIONThis 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 thecompanies through interpreting ratios for years 2015 and 2016. The financial data will beextracted from the Balance sheet, income statement and the cash flow statement. Thefinancial health will be determined for the purpose of assessing whether the investor shouldinvest or not. This report will also provide conclusion. Further in this paper therecommendations of business performance improvement and the limitations of the ratioanalysis is also given.COMPANY OVERVIEWSPORTS DIRECT INTERNATIOANL PLCThe Sports Direct International Plc is the largest and leading sports andlifestyle company in UK. The company was established in 1982. The company hasdiversified portfolio of clothing, footwear, equipment and accessories. The companyhas also expanded its operations in Asia, Europe and USA (Financial Times, 2017). Itis operated through 4 business segments such as UK sports retail, International Sportsretail, Brands and Premium lifestyle. Further it is also offers the range of productsthorough 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 around18280 employees work together to serve the clients in order to attain the new level ofexcellence (Annual report and accounts, 2017). The CEO of the company is MikeAshley and the chairman is Keith Hellawell.
MANAGING FINANCE3JD SPORTS FASHION PLCJD Sports Fashion Plc is a leading UK fashionable brand of multiplecompanies, own brand sports and casual wear. The company was established in 1981.The group has significant international brands such as Nike, Reebok, Puma andAdidas and also gained its image for being the most advanced merchandiser bykeeping stylish ranges of sportswear. The group has expanded its business operationsin other parts of the world such as Ireland, France, Spain, Germany, Italy, NewZealand and many more etc. Approximately the group has 1300 stores in the worldand around 23584 employees work together (Bloomberg, 2017). The group hascontinued to grow organically by acquiring every year fashion brands store. The keypeople of the group are: Mr. Peter Alan Cowgill is the Chairman and Mr. Brian Smallis the CFO of the group. Pent land Group Plc. is the holding company of the JDSports Fashion Plc. Further the company is also offers the range of products thoroughonline portal named getthelabel.com (JD Sports Fashion Plc., 2017).The above two companies are competitors to each other. Thus, theperformance of these two companies will be determined through Ratio analysis.RATIO ANALYISThe Ratio analysis is the best format to determine the financial stability of thecompanies by the individuals so that decisions of the investments can be taken accordingly.The companies are: Sports Direct International Plc.and theJD Sports Fashion Plc.arechosen 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 ismore viable option to invest.1.Current ratio:Current Ratio is the component of Liquidity ratio which determines theshort-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. Theformula for the computation of Current ratio is: Current Assets/Current Liabilities(Tracy, 2012).Sports Direct International Plc.Amount ($)Particulars20162015Current Assets1311437.00878297.00Current Liabilities540608.00382621.00Current Ratio2.432.30(Annual Report, 2016; 2015).Current Ratio2.202.252.302.352.402.452.432.30Current ratio20162015JD Sports Fashion Plc.Amount ($)Particulars20162015Current Assets510695.00400259.00Current Liabilities348154.00326748.00Current Ratio1.471.22(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 ofSportsDirect International Plc.is 2.43 in 2016 and 2.30 in 2015 whereas forJD Sports FashionPlc.it was 1.47 in 2016 and 1.22 in 2015.Thus, the liquidity position of Sports DirectInternational 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 ofLiquidity ratio. In this ratio, Inventories are not included in the computation becauseinventories are not converted into cash in a short span of time. It also measures theshort-term viability and growth of the company. The formula for computation of Quickratio 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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