Detailed Report: Financial and Cost Analysis of B&M and Comparison

This report provides a comprehensive financial and cost analysis of B&M, a UK specialty store company, comparing its performance with Morrison in 2020. It includes calculations and interpretations of profitability and liquidity ratios, such as gross profit ratio, operating profit ratio, return on capital employed, current ratio, and quick ratio. The analysis reveals B&M's stronger financial performance and upward trend compared to Morrison. The report also discusses the application of cost accounting concepts like product cost, period cost, marginal costing, and absorption costing within B&M. Furthermore, it explores the roles of financial and management accounting in the organization. The report concludes with recommendations for Morrison, emphasizing the importance of financial planning and strategies to improve performance ratios, such as focusing on risk management and maintaining a positive reputation through timely repayments.

Financial and Cost
Analysis

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Calculation of ratio..................................................................................................................................3
Interpretation of ratios............................................................................................................................4
Comment on the performance of selected company with similar company...........................................4
How cost in accounting can be applied to selected org...........................................................................4
How product cost can be applied to selected org...................................................................................4
How period cost can be applied to selected org......................................................................................5
How Marginal costing and Absorption costing concept can be applied to your selected org.................5
How financial accounting and Management accounting can be applied to your selected org................5
Provide recommendation in relation to importance of financial planning and recommendations
related to poor performance ratios.........................................................................................................6
REFERENCES................................................................................................................................................7

INTRODUCTION
B&M (also known as B&M Bargains and B&M Homestore) is an Uk specialty store
company based in Luxembourg. It was formed in 1978. It has a workforce of around 32,000
workers. It is a component of the FTSE 100 Index and is traded on the London Stock. The
company was started by Malcolm Billington as Billington & Mayman in 1978, with the very first
store opening in Cleveleys, England. In December 2004, Simon and Bobby Arora purchased the
company from Phildrew Ventures.
MAIN BODY
Calculation of ratio
Profitability ratio
analysis
B&M (2020) Morrison (2020)
Gross profit 1282808 629
Operating Profit 332812 521
Sales revenue 381338 17536
Capital employed 2604995 7524
GP Ratio Gross profit / sales *100 34% 4%
OP Ratio Operating profit / sales *100 9% 3%
Return on capital
employed
EBIT / Capital employed 13% 7%
Liquidity ratio Morrison (2020) B&M (2020)
Current assets 1319 1093495
Current liabilities 3396 965128
Inventory 660 5888000
Current ratio Current assets / Current
liabilities
0.39 1.13
Quick ratio Quick assets / Current liabilities 0.19 0.52

Interpretation of ratios
According to the above-mentioned data, B&M's GP ratio for the years 2020 and 2021 is 34 and
37 percent, respectively. Morrison's performance for the next two years has been 4 and 2%,
respectively.
It is mostly used by businesses to assess the profitability and efficiency of their operations. From
the calculated ratio, it can be seen that the OP ratio in B&M has improved from 9 to 13%, which
is lower than the optimum amount but still a significant improvement.
The greater the return on invested cash, the happier the shareholders are thought to be. The
B&M's ROCE in 2020 and 2021 is 13 and 23 percent, correspondingly. Morrison provides a 7%
and 3% return on capital used for the previous and current periods, respectively.
According to the calculated numbers, B&M is growing in an upward trend, as the current season
current ration has increased by 0.6 times over the preceding year. Morrison's efficiency falls
short of industry standards, albeit it has strengthened this year.
Comment on the performance of selected company with similar company
B&M has good financial performance as compare of similar organisation. From the ratio
calculation it is determining that B&M effectively run their business and get success. Morrison is
functioning inefficiently and has low financial health, according to the ratio study undertaken. In
order to remain effective, it is necessary to focus on making big improvements by following a
specific course of attack.
How cost in accounting can be applied to selected org.
Cost accounting is a type of management economics that attempts to integrate a B&M's entire
manufacturing costs by measuring both variable and fixed expenses, including a leasing price.
An assignment rate—the proportion of an investor's money or capital expenditure that is
employed toward a final investment—is used to estimate the applicable cost for every cost item.

How product cost can be applied to selected org.
Product costing methods are also used by businesses to investigate methods to lessen
manufacturing costs and increase revenues. Selecting more expense raw resources, for instance,
can help a B&M enhance revenue from retail trade by cutting product production costs.
How period cost can be applied to selected org.
Any expenditure incurred by a corporation that is not directly tied to the manufacturing process
are referred to as period costs. Period expenses are used in a company balance sheet throughout
their allocated income statement since they are unrelated to the cost of a single commodity or
inventory levels for a firm.
How Marginal costing and Absorption costing concept can be applied to your selected org
Application of Marginal Costing - Selling Price Fixation, Make or Buy Choices, Product Mix
Choice, Alternate Manufacturing Processes, and a Few Others Marginal costing's most important
contribution is that it aids management in making critical decisions. Whether or not a product
was sold during the time, absorption costing assigns fixed overhead expenses to it. This
technique of costing entails include greater costs in the inventory account, which is then carried
over as a company's balance sheet to the following quarter.
How financial accounting and Management accounting can be applied to your selected org.
In B&M, financial accounting is a form of accounting that involves recording, describing,
and summarizing activities emerging from company intervals over a period of time. As a result,
they will be able to make informed judgments about how to deploy their resources. Furthermore,
financial accounting aids in the communication of a company’s cash to third stakeholders
including such lenders and investors.
Managerial accounting may be used to make short - range and long choices about a
business's economic condition. Managerial accounting aids executives in making effective
decision aimed at improving the particular project, as well as lengthy investment choices. All

sorts of enterprises, encompassing service, commerce, and production, along with all aspects of
business organizations, use accounting techniques.
Provide recommendation in relation to importance of financial planning and recommendations
related to poor performance ratios
Morrison is advised to concentrate on his capacity to limit risk by employing appropriate
management strategies. It is critical for the company to maintain its reputation by making timely
repayments. Furthermore, it can aid in the development of positive supplier relationships,
allowing for efficiencies to be realized. It gives them a sense of direction in terms of their
ambitions or desires. Financial management aids in a deeper understanding of their objectives,
including why they're being met and how they affect other elements of their lives and money.
Planning supports inflationary control.

REFERENCES
Books and Journal
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Industries Ltd. Interpretation. 230156. pp.198687-00.
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Sons.
Dumitru, A.P., 2021. The Relevance of Measuring Performance Using Financial
Statements. Global Economic Observer. 9(1). pp.124-131.
Easton, P. D. and et.al., 2018. Financial statement analysis & valuation. Boston, MA:
Cambridge Business Publishers.
Herliza, H., Yulianti, O. and Ferina, Z. I., 2021. Analysis of Financial Statements for Assessing
Performance at PT. Enseval Putera Megatrading Tbk. Journal of Indonesian Management
(JIM). 1(3). pp.217-222.