Analytical Review of the Financial Position and Reporting of Next Plc.

2930 Words Mar 27th, 2011 12 Pages
Executive summary.

This report is prepared from the standpoint of a shareholder who is interested in the financial performance of Next plc with the particular concern for dividends, earnings and share price.

The main findings of this report are the following:
• accounting policies adopted by Next plc correspond to the required standards and, in our views, prove to be relevant, reliable, understandable and consistent.
• Analysis of investment ratios, gearing ratio and profitability ratios was done and, in our view, being a highly financed business Next plc managed to deliver quite decent results in this testing and critical period. It adopted such policies and made such decisions that allowed earning per share rise 24% and increase
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Objectivity is another characteristic of the accounting information that is not easy to assess being an outsider. Accountants are human beings and they have to exercise a certain amount of personal judgement when they prepare the financial statements. It is a characteristic that should be assessed internally by the company management or by the auditors who have access to internal accounting information.

2. Analysis of the financial strengths and weaknesses.

Since this report is prepared from the standpoint of a shareholder we will look at the following ratios: investment, profitability and gearing. Investment ratios are important for us as they assess the returns and performance of shares. Profitability ratios are crucial as they provide an insight to the degree of success in creating wealth for the business (Peter Atrill, Eddie McLaney, 2008) that directly affects the future of the business and can highlight additional indications of whether keeping on investing in this company or consider other alternatives. Gearing ratio will give us an idea of risks associated with our investment. We will do the comparison with the same ratios for the past period, i.e. for the period of six months to July 2009.

Having done calculations by applying the appropriate formulas we have received results as follow.

The investment ratios.

6 months to July 2010 6 months to July 2009
Dividend cover ratio

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