Diageo Plc Financial Analysis
The objective of this analysts report is to whether or not to invest £1 million in the company “Diageo plc”.
This report is divided into five parts. First, the company profile is introduced. Second, the performance overview of Diageo will be summarized. Third, the financial ratios analysis is presented. Then, I have analysed industry competitors comparing with Diageo. Final, after considering key relevance factors, the conclusion of the investment will be revealed.
“DIAGEO” Company Profile
Diageo plc is the world’s leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, wines and beer categories. These brands include Johnnie Walker, Guinness, Smirnoff, J&B, Baileys, …show more content…
Table 3: Diageo’s Liquidity Ratio 1. Current ratio, as table 3 shown, is increasing. It can be assumed that the company overall ability to meet its financial obligations has improved (Lee, 1998). 2. Acid or quick ratio indicates the company’s ability to repay immediate commitments using cash or near-cash (Elliot & Elliot, 2006). According to table 3, the company’s quick ratio is growing.
Gearing
Ratio/Year | 2010 | 2009 | 2008 | Gearing Ratio | 182.46% | 241.75% | 187.53% |
Table 4: Diageo’s gearing ratio
Gearing ratio represents the contribution of long-term lenders to the long-term capital structure of a business (Atrill & McLaney, 2008). A company with high gearing is predominantly financed by debt (Elliot & Elliot, 2006). We can see from table 4 that Diageo gearing ratio is rather high, however, this ratio needs to be compared with other companies in the industry to judge the reasonableness (http://bizcovering.com/)
Investor
Ratio/Year | 2010 | 2009 | 2008 | 1. Dividend Payout Ratio | 0.43 | 0.56 | 0.58 | 2. Dividend Cover Ratio (times) | 2.97x | 3.10x | 3.01x | 3. Dividend Yield (ttm) | 3.5 | - | - | 4. Earning Per Share | 65.5p | 64.6p | 59.0p | 5. PE Ratio | 14.30% | 12.50% | 14.30% |
Table 5: Diageo’s Investor Ratio 1. Dividend payout ratio is the proportion
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