Financial Ratio Analysis on Morrison Supermarket PLC. Essay

3657 WordsDec 9, 201315 Pages
Financial Ratio Analysis on Morrison Supermarket PLC: Assignment 1 Contents Page 1.0 Introduction …………………………………………………………………………….2 2.0 Calculations and Analysis of Findings with Recommendations………………………………………………………. ………….………...2-6 3.0 Discussion ………………………………………………………………………………6 4.0 Conclusion ……...………………………………………………………………………7 Appendices……………………………………………………………………………….8-11 Reference List ……………………………………………………………………………12-13 1.0 Introduction The financial report aims to provide potential investors, lenders, shareholders (or directors on their behalf) and management an objective insight into the performance and profitability of Morrison during the period…show more content…
There seems to be a trend in the ROCE for Morrison, as the percentage of ROCE is falling. This suggests that Morrison is becoming less efficient with their capital. However, with the interest rates at 4% (before tax) in 2011 and 2012 (Morrison plc, 2012), the company covers the rate it pays for its borrowed funds convincingly. Compared with Tesco, Morrison is slightly more profitable on average capital employed in 2012. However, Morrison’s managers must avoid the trend in falling ROCE by improving the distribution of capital in order to maintain their advantage over Tesco. 2.2 Efficiency Ratios for Morrison 2009-2012, and Tesco 2012 Morrison Supermarkets PLC 2009 2010 2011 2012 Tesco PLC 2012 Average Inventory Turnover Period (AITP) (days) 13.2 14.7 15.2 16.9 22.2 Average Settlement Period for Trade Payables (ASTP) (days) 38.7 34.3 33.3 31.3 36.7 Sales Revenue to Capital Employed (on average) (SRCE) 3.3 2.4 2.4 2.4 2.1 Refer to table 3 for comprehensive findings. Refer to the summary table of the income statement and balance sheet in appendices. Information obtained from the annual reports of Morrison 2009-2010, 2010-2011 and 2011-2012, and Tesco 2011-2012. The AITP ratio measures the average period a firm holds on to their stock in days during a given period (Atrill and McLaney, 2011). There has been a steady increase in Morrison’s AITP
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