Financial Analysis Report: Burberry Group PLC, Business Finance

This report provides a financial analysis of Burberry Group PLC, examining key financial ratios to assess its operational efficiency, liquidity, profitability, and overall financial health. The analysis includes calculations and interpretations of ratios such as Return on Capital Employed (ROCE), current rati...Read More

Running Head: BUSINESS FINANCE
BUSINESS FINANCE
Name of the Student
Name of the University
Author Note

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Table of Contents
Financial Analysis......................................................................................................................2
Reference....................................................................................................................................4

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Financial Analysis
The ratio analysis is qualitative method to gain insights into the operational, liquidity,
profitability and efficiency with the help of comparing information contained in the financial
statements. Burberry Group PLC is the British luxury fashion house, which is headquartered
in London. It is the main houses of fashion that distributes and focusses on trench cost,
cosmetics, sunglasses, fashion accessories and ready-to-wear outerwear.
The return on capital employed of Burberry shows that efficiency and profitability of
company with which the capital is used has been increased in comparison to the previous
year. The calculated current ratio of company indicates that the liquidity position of company
is good. It shows that Burberry is having enough short-term assets for paying its short-term
liabilities. The acid test ratio of Burberry indicates that company is able for meeting its
obligations of short-term with the most liquid assets. The calculated gearing ratio of company
shows that uses of debt relative top the total equity has been decreased. The equity is more in
comparison to uses of debt. Further, the calculated inventory turnover ratio gives the
indication that Burberry is not able to manage the level of inventory. The inadequate level of
inventory means that sales have been decreased. Hence, it is not positive indicator of the
effective management of inventory1.
The calculated payable day’s ratio shows that Burberry is taking more time in paying
off its outstanding bills to their suppliers. Generally, it is good indication because company
prefers to take more time to make payments, as they could utilize that amount in some more
useful areas. Moreover, the calculated receivables days shows that the time taken by
company for collecting the receivables from the customers is very less. It is almost one-
1 Wikan Budi Utami, 'Analysis Of Current Ratio Changes Effect, Asset Ratio Debt, Total Asset Turnover,
Return On Asset, And Price Earning Ratio In Predictinggrowth Income By Considering Corporate Size In The
Company Joined In LQ45 Index Year 2013 -2016' (2017) 1 International Journal of Economics, Business and
Accounting Research (IJEBAR).

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month time period. This indicates the efficiency level of company. During the short span of
time, company is able to turn its accounts receivables into the cash2.
The calculated dividend per share shows that Burberry is expected for distributing
good amount of earnings as the dividends that is less than the retained earnings. Hence, the
higher payout ratio is viewed as good from the perspective of investor. In addition, the
calculated dividend yield shows that there is lower yield. The company is not able to generate
higher yield for their stockholders. The lower dividend yield is not good for the investors to
buy the stock for dividend income.
Therefore, it can be said that efficiency, profitability and liquidity position of
company is good. The company have also maintained its stability in making the payment of
dividend. However, the dividend income in relative to market price of share is less, which is
not good from the perspective of investor3.
2 Imas Nurani Islami and William Rio, 'Financial Ratio Analysis To Predict Financial Distress On Property And
Real Estate Company Listed In Indonesia Stock Exchange' (2019) 2 JAAF (Journal of Applied Accounting and
Finance).
3 Annual Report 2018/19 (burberry Corporate Website, 2019)
<https://www.burberryplc.com/en/investors/annual-report-2018-19.html> accessed 31 December 2019.

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Reference
Annual Report 2018/19 (burberry Corporate Website, 2019)
<https://www.burberryplc.com/en/investors/annual-report-2018-19.html> accessed 31
December 2019
Islami IW Rio, 'Financial Ratio Analysis To Predict Financial Distress On Property And Real
Estate Company Listed In Indonesia Stock Exchange' (2019) 2 JAAF (Journal of Applied
Accounting and Finance)
Utami W, 'Analysis Of Current Ratio Changes Effect, Asset Ratio Debt, Total Asset
Turnover, Return On Asset, And Price Earning Ratio In Predictinggrowth Income By
Considering Corporate Size In The Company Joined In LQ45 Index Year 2013 -2016' (2017)
1 International Journal of Economics, Business and Accounting Research (IJEBAR)