Financial Analysis of T plc: A Business Finance Performance Report

This report provides a comprehensive financial analysis of T plc, evaluating its performance based on profitability, liquidity, working capital management, and stock market performance. The analysis reveals that T plc has strong profitability, exceeding industry averages in both gross and net profit margins. However, liquidity is a concern, with current and quick ratios slightly below industry standards. The report also assesses working capital management and finds it needs improvement. Despite these challenges, T plc demonstrates good stock market performance, with a favorable price-earnings ratio and increasing earnings per share. The report concludes with a justification for investment, highlighting the company's potential for providing good returns to investors due to its profitability and stock market performance. Desklib provides students access to solved assignments.

Business finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Profitability.................................................................................................................................3
Liquidity......................................................................................................................................3
Working capital management.....................................................................................................4
Stock market performance..........................................................................................................4
Justification for investment.........................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Finance is the amount of money which is necessary for the company in order to manage
and run the business in successful manner. For any business to get successful, appropriate use of
finance is necessary. The present study will outline the discussion of performance of T plc with
help of evaluating its performance on basis of different ratios and industry averages.
MAIN BODY
Profitability
For analysing the success of the company, the most essential aspect is the analysis of the
profitability of business. this is pertaining to the fact that when company will be profitable then
only they will get successful. With the analysis of the data provided, it is clear that company is
having a constant gross profit margin that is 39 % and 40 %. On the other side, the industry
average of gross profit margin is 37 %. Hence, in comparison with the industry average, T plc is
working good as they are having 40 % gross profit margin which is good for company. on the
other hand, on basis of net profit margin as well, it can be stated that company is performing very
well in comparison to industry average (Paun, 2017). This is particularly because of the reason
that the industry average for net profit is 4 % and company is having 5.8, 5.9 and 6.05 % for
2018, 2019 and 2020 respectively. This fact outlines that the net profit margin of the company is
above industry average. With this it can be articulated that company is performing good in
comparison to other companies within the industry.
Liquidity
Along with profitability it is very essential for T plc to maintain good liquidity as well for
managing the operations of company. the liquidity is the capability of company to convert their
current asset into cash very frequently. With the analysis it was seen that company is not having
good liquidity. This is particularly because of the reason that in accordance to industry standard,
current ratio is 1.05:1 but the company is not having good ratio that is 0.8:1. This simply means
that company is not even having a single asset to pay off a single liability (Sutarno and et.al.,
2019). Similarly, with respect to quick ratio the performance is nearby the industry standard.
This is pertaining to the fact that industry standard is 0.5:1 and in actual company is having 0.4:1
which is slightly less than the standard. But overall it can be evaluated that liquidity of company
is little less in comparison to the industry standards.

Working capital management
In order to manage the business operations in proper and effective manner, it is very
essential for the company to manage the working capital effectively. This is necessary because
working capital management involves the designing strategies to monitor and use the current
asset and liabilities in best possible manner that it yields maximum profits. This is necessary for
the effective management of the business as if day to day expenses of company will be managed
in proper and effective manner then this will be improving the performance of the company
(Walmsley and et.al., 2018). with the help of current ratio, it is clear that company is not having
enough assets to pay off the liabilities easily. As per the standard it is required for a company to
have twice asset for every current liability. But in actual company is not having this and thus, it
can be stated that working capital management of company is not effective.
Stock market performance
After evaluating working capital it is also necessary for the company to analyse the stock
market performance. this is necessary in order to analyse that what position the company is
having within the highly competitive market. Thus, this help of comparisons with industry
standard it can be stated that price earnings ratio is good for the company. as per industry
standard price earnings ratio is 22 and with respect to T plc latest performance it is 25. This
simply means that company is having good position within the market and is able to provide
good earning to its shareholders. Moreover, the earning per share of the company stock is also
increased in comparison to last year that is in 2019 it was 23p and in 2020 it increased to 25p.
with this it can be implied that the stock market performance of company is good as they are
providing good return to company (Mostafa, Montemagno and Qureshi, 2018). in addition to
this, return on shareholder’s fund is also good in comparison to industry standard. This simply
means that industry is having 12 % return in shareholder’s fund but in 2020 company provided
16 % of return on shareholder’s fund. Thus, it can be stated that return is good to shareholder and
this will improve competitive advantage of company.
Justification for investment
As a potential investor, it is recommended to invest within T plc because investors will be
provided with good returns. Investment in T plc is advisable as the profitability of company is
high with respect to industry standards. Thus, this will be providing more return to the
shareholders and also will attract the investors. Along with this, stock market performance of the

share of company is good that is it is outperforming in comparison to the industry standard.
Thus, with this it can be stated that the company is performing good and will provide good
returns to its investors. Hence, investment within T plc will be beneficial to the investors in
getting good returns from company as they are yielding good amount of return.
CONCLUSION
The above analysis evaluated the fact that finance is very essential for the success of the
business. this is pertaining to the fact that when the finance is managed effectively then this will
improve working efficiency of company. The above report evaluated that profitability of
company is good but they are not much effective in managing their liquidity. Moreover, it is
worth to invest in the company as they are providing good return to company that is 25p earning
per share.

REFERENCES
Books and Journals
Paun, D., 2017. Sustainability and financial performance of companies in the energy sector in
Romania. Sustainability, 9(10), p.1722.
Walmsley, T. G., and et.al., 2018. Energy Ratio analysis and accounting for renewable and non-
renewable electricity generation: A review. Renewable and Sustainable Energy Reviews,
98, pp.328-345.
Mostafa, K.G., Montemagno, C. and Qureshi, A.J., 2018. Strength to cost ratio analysis of FDM
Nylon 12 3D Printed Parts. Procedia Manufacturing, 26, pp.753-762.
Sutarno, S., and et.al., 2019, December. Implementation of Multi-Objective Optimazation on the
Base of Ratio Analysis (MOORA) in Improving Support for Decision on Sales Location
Determination. In Journal of Physics: Conference Series (Vol. 1424, No. 1, p. 012019).
IOP Publishing.