University of Bedfordshire

Individual Report

Financial Analysis (AAF001-6)

Assignment 1-B

Prof. Mohammed El Daly

Prepared by

Moin Ul Haq Jan

Msc. International business and Management

November 13 2010

CONTENTS

Introduction

Background

Analysing Financial and Profitability Ratios

Current Ratio Liquidity Ratio Solvency Ratio Assets turnover Ratio Profit Margin Debtor Days Creditor Days Gearing Ratio Stock Turnover Ratio Return on Capital Employed Return on Shareholders’ Funds

Conclusion and Recommendation

Appendix
*…show more content…*

Analysis of the Financial and the Profitability Ratios

1. Current Ratio helps us measure the ability of a company to pay off its short term debts using its most liquid assets. 1.5 is the benchmark. If it’s less than 1 that means the company is not able to meet its current liabilities using its liquid assets.

In th GBP

31/03/2010

31/03/2009

31/03/2008

31/03/2007

Current assets 278,200 326,100 348,200 217,000

Current Liabilities (386,800) (310,300) (271,100)

(252,900)

Current Ratio 0.90 1.05 1.03 0.86

Interpretation and Explanation

In case of BBC, we can observe a positive trend. There has been a significant increase in the ratio. However in 2007, the company’s current liabilities were higher than the current assets.But over the next two consecutive years 2008 and 2009, the company’s assets were enough to pay off the short term debts, and this is a positive sign. Talking about the current year 2010, the current ratio is below the benchmark, but the cash reserves are more. we can see a constant change in the values of current assets in a positive trend for last three years, however, not for the year 2010. Again there has been increase in current liabilities substantially. This can be one of the reasons for a funding cut of £340m this year by BBC as George Osborne confirms the news on Oct 20th 2010.

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