assignment for accountingWord格式.docx

1、Cost of sale3,970.73,794.0Gross profit1,881.21,788.8Operating profit258.098.7Profit before tax265.2104.1Profit after tax190.972.8Capital employed3019.33,005.9profitability ratioGross profit margin32.1%32.0%Operating profit margin4.4%1.7%Pre-tax profit margin4.5%1.9%Post-tax profit margin3.3%1.3%Retu

2、rn on capital employed8.5%Return on equity7.0%2.8%The profitability this year is worse than last year. The gross profit margin decrease slightly. Because the financial crisis, on the fact that working-class families were hammered by the recession and havent got out of it. They reduce the consumption

3、 even under some of the promotional activities. Therefor revenue drops by 4.6% from 2011 to 2012, the cost of sale increase by 4.45% at the same time. But overall, the gross profit margin is high still more than 30%. In the respect of the operating profit margin, the figure fluctuate a lot, which de

4、crease from 4.4% to 1.7%.The big erosion of GPM comes from the selling costs, which is a big and important part of retail industry. Additionally, the administrative costs increase more than 10%, which the main factors that lead to a great increase in total net operating expense and decrease the oper

5、ating profit margin. In this case, it is not a good opportunity for management investors to invest this company. So the company needs to control the cost of sale and administration as well as increase the competition to get the most market share to increase revenue and improve the profitability. The

6、 pre-tax profit margin declines from 4.5% to 1.9%, which due to the decrease of finance income is more than the increase of finance expense. The PostTPM also drops from 3.3% to 1.3% although the tax expense fell by over 33.ROE and ROCE are two important ratios, while they drop from 7% to 2.8% and 8.

7、5% to 3.3% respectively. The capital employed decrease 44% from 2011 to 2012, because equity decreases more than borrowings increase. ROE also decreases, which means less profit is available to shareholders as dividends.Equity investors should analysis investment ratioFigures can be seen form the ta

8、ble:Earnings per share23.19.1Dividend per share14.24.7Dividend cover1.6267605631.93617Dividend yield1.103835360.500332668Price earnings ratio3.25324675311.74725275Although the number of shareholders has decrease nearly 3.5% the EPS has reduced from 23.1 to 9.1. The most important reason is the drop

9、of profit. It is a bad news for equity investors.Dividend per share 2012 almost half of that in 2011, not only because in 2012 the Board of Directors does not recommend a final dividend in respect of the year ended 3 March 2012,but also due to the fewer interim dividend. This figure means investors

10、will get fewer dividends from the The dividend cover increase from 1.6 to 1.9, it means the ability to pay dividends become stronger. But due to the limitation of ratio analysis and the situation of dividends distribution, Liquidity ratiocurrent asset1,898.701,731.20current liability1,118.501,002.70

11、inventory1,016.80933.2trade payable58.7055.8cost of sale3,970.703,794.00current ratio1.697541351.726538346liquid ratio0.7884666960.795851202inventory days93.4676505489.77807064Trade payable days45.9065152245.74525567Trade receivable days31.6667236332.22549617To analysis the financial position of thi

12、s company, both current ratio and liquid ratio increased which means the short term debt paying ability increased. The liquid ratio is less than 1, mainly because of the large number of inventories for resale. The inventory days decrease from more than 93 days in 2011 to about 90 days in 2012,it is

13、a little high, and do not match the “just in time” principle ,but it still can be accept because of the wholesale and retail industry. Large inventories increase the cost of store and management but it provides enough choices for customers and ensures the market share to certain extent.Trade payable

14、 days in 2012 almost the same as that in 2011.One and a half month less than period of trade receivable days, which means the company can use the trade receivable to meet the trade payable and less the use of cash. Gearing ratioDebt to equityNet debt to equity-0.07400777-0.058113235Interest cover5.1

15、394422312.039256198Net interest coverThe debt to equity drops from 14.49% to 10.15% which means that the company relies less on the money from borrowing. The decrease indicates that the companys long-term debt paying ability improved.Net debt to equity is less than debt to equity because of the dedu

16、ction of cash from the non-current liabilities .This ratio decreases from 7.09% in 2011 to 4.33% in 2012 and the deviation from last year means the lower risk of the business failing in 2012.When it comes to Interest cover, the decrease of this ratio demonstrate that the ability to pay the interest

17、become weaker and the decrease of profitability and stability. Cash flow per share0.3217851560.258558446The cash flow per share shows the percentage of net cash flow from operating activities and total number of equity share. Although the total number of equity shares decrease, the ratio still decre

18、ase, because the net cash flow from operating activities drops more than 20%.This ratio is more than EPS, due to the net cash flow generated by the companys normal operating activities also include the costs deducted from the profits, but do not affect the cash outflow adjustments, such as depreciat

19、ion charges. So the cash flow is less than the profit. CFPS indicate the highest amount of cash dividends, while EPS cannot show this ability.Appendix:Profitability:1. Gross profit margin=gross profit /revenue2011: =1,881.20/5,851.90=0.3212012: = 1,788.80/5,582.80=0.3202. Operating profit margin=ope

20、rating profit/revenue =258/5,851.90=0.044 =98.7/5,582.80=0.0183. pre-tax profit margin=pre-tax profit/revenue =265.2/5,851.90=0.045 =104.1/5,582.80=0.0194. post-tax profit margin=post-tax profit/revenue =190.9/5,851.90=0.033 =72.8/5,582.80=0.0135. Return on capital employed=operating profit/total ca

21、pital employed = 258/3,019.3=0.085 = 98.7/3,005.9=0.0336. Return on equity=profit after tax/equity =190.9/2,741.20=0.070 =72.8/2,625.4=0.028Investment ratio1. Earnings per share （EPS） =profit after tax/total number of equity shares*100 = 23.1 = 9.11. Dividend per share （DPS） it is given 2011 :=（ 38.

22、1+79.9）/ 831.3=14.2p per ordinary share =37.6/803.3=4.7p per ordinary share.2. Dividend cover（DC）=EPS/DPS =23.1/14.2=1.626760563 = 9.1/4.7=1.936173. Dividend yield=total dividend /current market price*100The current market price can get from the London exchange stock which is 106.90 for 22 Nov 2012T

23、he current market price for 22 Nov 2011 can get form historical price YAHOO finance, which was 75.15. =118/106.90=1.10383536 =37.6/75.15=0.500332668 4. Price Earnings ratio=current market price /EPS= 75.15/23.1=3.253246753=106.90/9.1=11.74725275Liquidity1. Current ratio=current asset/current liabili

24、ty= =1,898.70/1,118.50=1.69754135 =1,731.20/1,002.70=1.72653832. Liquid ratio= （current asset-inventory）/current liability= =881.9 / 1,118.50=0.788466696 =798.0 / 1,002.70=0.79585123. Inventory days= （inventory/cost of sales）*365 = （1,016.80/3,970.70）*365=93.46765054 = （933.2/3,794.00）*365=89.778071

25、4. Trade receivable days=trade receivables/revenue*365 =507.7/5,851.90*365=31.66672363 =492.9/5,582.80*365=32.225496175. trade payables days=（trade payables/cost of sales）*365 =499.4/3,970.70*365=45.90651522 =475.5/3,794.00*365=45.74525567Gearing1. debt to equity=non-current borrowings/equity*100 =0/2,625.4=0 =0/2,741.2=02. Net debt equity=Borrowings less cash/Total equity = （0-194.3）/ 2,625.4=-0.07400777= （0-159.3）/ 2,741.2=-0.0581132353. Interest cover =operating profit/interest =258/50.2=5.139442