Comprehensive Financial Analysis of Morrison PLC (2019-2021)

This report provides a financial analysis of Morrison PLC, a UK-based supermarket, using financial ratio analysis for the years 2019, 2020, and 2021. It examines profitability, liquidity, and efficiency ratios, revealing trends and the impact of COVID-19 on the company's performance. The analysis of the income statement, balance sheet, and cash flow statement highlights key issues such as declining profit margins, increased debt, and reduced cash inflow from operating activities. The report concludes with recommendations for Morrison PLC to improve its profitability, manage expenses, and attract investors. Desklib provides this assignment as a solved example for students.

2. MANAGING
FINANCE
Coursework

EXECUTIVE SUMMARY
A fundamental concept in a corporate is the handling of cash and the economic resources of
the company. This management is carried out with the help of many techniques outlined in
strategic management. Financial ratio interpretation is one of the most important tools for
forecasting business performance and making adjustments in the firm that are needed to do better
inside the marketplace. The use of financial ratios in the instance of Morrison PLC, a UK based
supermarket, is highlighted in this report. The firm receives an analysis of the ratios as well as
recommendations. The study takes into account the company's annual reports for the years 2019,
2020, and 2021.

Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Background of the company Morrison........................................................................................4
Comments on the performance of company using the Financial Ratio Analysis........................4
Analysis of the Financial Statements...........................................................................................6
Findings from the above Ratio Analysis with recommendations made to the company.............7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................10

INTRODUCTION
Managing finance is a classifying the resources of the organisation considering the
management principles which needs to be followed. It also assists in formulating the financial
policies and controlling them in an appropriate manner. It is one of the most major part of the
organisation (Abutabenjeh, 2021). In this report, the ratios of the company Morrison Plc has
been calculated of the year 2019 to 2021. Through this the efficient profitability, and the
liquidity position of the company can be analysed. Morisons is a supermarket which is based in
UK and is a public limited company (PLC) on the London stock exchange. It was established in
the year 1899 and was founded y William Morrison. Further the interpretation of the ratios id
done and a suggestion is given that the investor should invest or not in the organisation.
MAIN BODY
Background of the company Morrison.
WM Morrison Supermarket Plc, incorporated in Bradford, West Yorkshire, England, is the
UK's fourth largest supermarket company. William Morrison established it in 1899. It all started
with an eggs and cream booth in Bradford's Rawson Market. Morrison had predominantly
focused its shop sites in the northern England until 2004, when it acquired Safeway. The
enterprise now has 475 stores in the United Kingdom. Food and grocery - the weekly shop –
account for the majority of company revenue. Morrison sources and processes a wide range of
foods in-house, allowing them to maintain strict control so over source and quality (Anopchenko
and Ostrovskiy, 2021). Furthermore, they employ more employees to prepare food in the store
than every grocery.
Comments on the performance of company using the Financial Ratio Analysis.
Profitability Ratio: It is computed for the classifying the capability of the corporation in
term of the profit and the benefits earned on the net revenue and other costs. Here, the usage of
income statement is mainly used for computing the proportions. These ratios are calculated
below:
 Net profit Margin = (Net income / Net sales) * 100
2021 = (96 / 17598) * 100 = 0.545 %

2020 = (348 / 17536) * 100 = 1.98 %
2019 = (244 / 17735) * 100 = 1.38 %
 Operating Profit Margin = operating profit / sales * 100
2021 = (254 / 17598) * 100 = 1.44 %
2020 = (521 / 17536) * 100 = 2.97 %
2019 = (394 / 17735) * 100 = 2.22 %
Analysis: From the above calculations, it can be find that the net earnings margin ratio of
the company has been decreased from the year 2019 which is now 0.545 %. By the decrement in
the revenue and a major decrease in the net profit also. Further, the return in the investment also
shows the decrease by approximately 1 %, it is because the major decline in the profit and also
the cost increased of the investment. Moreover, the operating margin is also being diminishing
even when the sales has been elevated. It is because of the increase in the operating expenses.
Liquidity Ratios: From this type of ratio the liquidity position of the company can be estimated.
It shows the efficiency of the organisation to pay its short – term liabilities (Berenguer and Shen,
2020).
 Current ratio = Current assets / Current liabilities
2021 = 1430 / 2981 = 0.48: 1
2020 = 1322 / 3396 = 0.39: 1
2019 = 1382 / 3295 = 0.42: 1
 Quick ratio = (Current assets – inventory) / current liabilities
2021 = (1430 – 814) / 2981 = 0.21: 1
2020 = (1322 – 660) / 3396 = 0.19: 1
2019 = (1382 – 713) / 3295 = 0.20: 1
Analysis: From the above – mentioned figures which are computed, it can be analysed
that the company has the efficiency to pay its liabilities in a short period of time. It can be
estimated because the ideal current and the quick ratio is 2: 1. Now, here the ratio of Morrison’s
has shown an elevation in the existing assets with the decrease in the liabilities. The current
assets of the firm are £ 1430 in 2021 and it was less in 2020 and 2019 by £ 1322 and 8534
respectively. The current ratio in the year 2021 is 3.22 and quick ratio is 2.95. The difference is
due to the variation on the inventory. As the acid – test ratio only includes the current assets

excluding the inventory and prepaid expenses. IT can be assessed that the firm is unable to pay it
obligations on a specific time limit. This is not good for the sustainability of the corporation.
Efficiency Ratios: This ratio helps in measuring the efficient of the firm with respect to the
inventory, costs, purchases, sales and assets from the profit (Buckman and Martínez, 2021). It is
calculated in the time the turnover has been done or in days.
 Inventory Turnover ratio = (Average inventory / Cost of goods sold) * 365
2021 = (737 / 17210) * 365 = 15.63 days
2020 = (686.5 / 16907) * 365 = 14.82 days
2019 = (699.5 / 17128) * 365 = 14.9 days
 Asset Turnover Ratio = Net sales / Average Total Assets
2021 = (10978 / 17598) * 365 = 227 days
2020 = (10418 / 17536) * 365 = 216.84 days
2019 = (9791.5 / 17735) * 365 = 201.52 days
Analysis: The inventory turnover ratio of Morrison’s has been decreased which depicts
that the company is changing the inventory around every 14 days in a year in 2021. Its decrement
is beneficial for the company which represents that the company is able to show its efficiency.
Even though the average inventory has been increase in 2021 from 686.5 to 737, also the 17210
is the money spend on the cost for the sale of the goods. But both the ratio inventory and asset
turnover time period has increased which needs to be lowered down.
Overall from the above computations, it can be examined that the effect of covid-19 can be
seen sin the performance of Morrison’s. Due to the impact of the covid-19, the business of the
company has effected which in turn has diminished its profits a lot, even when there is an
increment in the net sales. It is due to the cost of expenditure which has impacted the working
and functioning of the business performances. The sales of the company are increased but the
profit has diminished. It means that there is a lack of strategy and cost formulating which is
leading the company towards facing the losses.
Analysis of the Financial Statements.
From the income statement it can be interpreted that the gross profit of the company has
shown a major decline due to the increase in the cost of the goods sold. The income from the
operations has been the half in the year 2021 by distinguishing it from the year 2020. The EPS of

the company has also been decreased major from £14.60 to only £3.99 per share. It is not at all
beneficial as it means the company is losing it market vale very rapidly. The sales have increased
a little by approximately £50 million.
In the balance sheet, the non-current assets had decline by approximately £8 million in
which the goodwill has decreased by around £50 m. It means the profitability has also impacted
its brand image in the market as well as in the industry. The stock for the period has also
increased which is good for the company as it shows that the company is efficient enough to
main a pre – stock for its immediate selling. The current liabilities have also dished by the
decrease in the trade payable and current borrowings of £2837 and 54 only in 2021 from £3051
and 237 in 2020. The non – current bowing of Morrison has increased a lot by about £ 800 m
which means that the company is taking so much of debt from the market as it is not been able to
fulfil its short – term liabilities. The company should focus on increasing its capital and
decreasing its liabilities. Overall the net assets of the company have decreased which has shown
the impact on the performance of the company.
In the cash flow statement, the net inflow of the cash from the operating activities is only
around 10 % in 2021 of it in the year 2020. It is not good, the company should focus on its daily
functional activities and recommend a suitable idea for the benefit of the corporation. The
investment is increased comparatively from 2020 to £ 504 in 2021 which is the out of the money.
The cash inflow of the financing activities in £ 350 in 2020 and 318 in 2019.
Findings from the above Ratio Analysis with recommendations made to the company.
It can be recommended from the above ratio analysis and financial statement that the company
should -
 focus on the increasing more the revenue with the decrease in the operating expenses.
Because due to it the profitability of the firm is diminishing. Ultimately which will affect
the market value of the company has will make the company suffer a downfall. So, as
soon as possible, the administration should concentrate increasing its profitability.
 The dividends which are distributed to the investors should be in the ordinary terms and
the special dividends must be considered by the board of the directory. Through this, the
company will able to get more investors.

 The company should review its talent and provider functional support to its employee so
that the new and innovative ideas can be captured by the business.
CONCLUSION
It can be summed up from the above mentioned report, that managing and proper allocation
of the funds and determination of the costs is very essential. The annual position of the company
is not very unimpressive from the investor’s point of view. IT need to modify and amend its
strategies. By evaluating the fiscal report, it can be seen a downside movement in the company
scenarios which is challenging for fulfilling the adequate requirement of the company. So, it
should focus of increasing its sales by adopting new strategies. In the compliances, the liquidity
and the efficiency ratio is also not satisfactory of the company. It will force the investors to
withdraw their funds and can lead to face the situation of losses and decrease in the market share.
COVID-19's influence on the realizable amounts of each asset type, as well as any changes made
We assessed and questioned executives on how they accounted for COVID-19's influence on
future revenues in their impairment studies, as well as the coherence of the estimates with the
assumptions utilised in the viable business analysis. We have evaluated management's COVID-
19 financial statement disclosures and are convinced that they should be compatible with the
Group's risks, their environmental impact study, as well as the protocols that we have done.

REFERENCES
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APPENDIX