ACCOUNTING ASSIGNMENT

Next Plc Analysis

Executive Summary

Next Plc (Next or "the company") is a retailer that offers clothing, footwear, accessories and home products. The company primarily operates in the UK. It is headquartered in Leicester, UK and employed 58,706 people as of January 29, 2011, of whom 37,220 were employed full-time. The company recorded revenues of £3,453.7 million (approximately $5,323.5 million) during the financial year ended January 2011 (FY2011), an increase of 1.4% over FY2010.The operating profit of the company was £570.8 million (approximately $879.8 million) during FY2011, an increase of 8.1% over FY2010. The net profit was £401.1 million (approximately $618.3 million) in FY2011, an increase of 10.2% over FY2010. The report includes a complete SWOT analysis, about the business, mission statement, financial ratios, and porter 5 forces and in the end some valuable recommendation to NEXT plc.

Executive Summary1

Introduction3

About the Company5

NEXT Plc Mission Statement5

Body6

SWOT Analysis6

Financial Ratios7

Z-Score Analysis9

X1 Component10

X2 Component11

X3 Component12

X4 Component12

Liquidity Ratios17

Debt Management18

Asset management19

Investor Ratios20

Recommendation20

Conclusion22

References23

Next Plc Analysis

Introduction

Next Plc (Next or "the company") is primarily engaged in the retail sale of clothing, footwear, accessories and home products. The company operates in the UK. The company operates through seven business segments: NEXT Retail, NEXT Directory, NEXT International, NEXT Sourcing, Ventura, property management and other. Next conducts its distribution activities through three business segments: NEXT Retail, NEXT Directory, and NEXT International. NEXT Retail operates a chain of more than 500 stores in the UK and Ireland. NEXT Directory is a home shopping catalogue and website with approximately three million active customers. It serves customers in over 35 countries outside the UK through its international website, NextDirect.com. The company's NEXT International segment operates over 180 stores in more than 30 countries overseas.

The NEXT Sourcing segment is engaged in the design, sourcing, buying, merchandising and quality control of Next branded products. It primarily operates in mainland China, Hong Kong, Sri Lanka, India and the UK. Ventura provides customer services management to clients who wish to outsource their customer contact administration and fulfillment activities. It operates six call centres in the UK and one in India. Ventura was sold to Capita Group in July 2011. Next's property management segment holds properties which are sub-leased to other segments and external parties. The other segment comprises sales by Lipsy and third party distribution activities. Lipsy designs and sells its own branded younger women's fashion products through retail, internet and wholesale channels.

The main parts of a financial statement (Balance Sheet, Income Statements, Cashflow and Retained Earnings Report) are figures describing the company's performance over the period. But how could we asses the company's performance over numbers? How could numbers form some explicit meaning causing it to describe the company's overall condition? The answer is financial ratios.

Financial ratios are imperative analysis tool to define management performance and how best have the exploit available resources to maximize shareholders value. The ratios can be compared to similar industry or internal financial figures over a period of time (trend analysis). Beside its function as a tool of historical measurements, the ratios, ...