CONSULTANCY SKILLS PROPOSAL

Consultancy Skills Proposal

Consultancy Skills Proposal

Introduction

ASDA Group Ltd. operates as one of the largest food retailers in the United Kingdom. The company's stores sell a wide variety of merchandise including food and apparel, along with house wares, music, videos, and books. ASDA has approximately 259 stores in its arsenal--each averaging nearly 42,000 square feet with some as large as 100,000 square feet. The company, once known as a dairy conglomerate, was acquired by Wal-Mart Stores Inc. in 1999. Under its new parent's guidance, ASDA has been adding pharmacies, opticians, jewellery, and photo departments to its stores.

Mission

The purpose of this consultancy report is to provide corporate strategy and forecast financial position for ASDA food retailers, which will be measured by company's growth in sales, and in opinions and ratings published in the media. Inventory and sales records will be utilized to identify and exploit best selling products and profitability to service levels, anticipate demand, manage cash flows, assist with revenue growth plans, and optimize supplier/distributor relationships.

Goals:

Earn and maintain ASDA rating as one of the best stores in the retail trade business.

Establish 30% minimum gross profit margins (retail price less wholesale cost) from inception.

Achieve a profitable return on investment within three years.

Earn a 15% internal rate of return for investors over the life of the lease.

Company's financial Performance

Profitability Ratios

Profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business. Profitability ratios offer several different measures of the success of the firm at generating profits (Fabozzi, 2004, 54).

Inventory Turnover

Inventory Turnover simply indicates the liquidity of the company's receivables.

Interpretation

We can see the declining trend of the Inventory Turnover which is very favourable for the company as it enhances the liquidity of the inventory, which helps in cash generation and ultimately improves the cash cycle.

Average Collection Period

Average Collection Period simply indicates the liquidity of the company's receivables in days.

Interpretation

We can see the inclining trend of the Average Collection Period which is unfavourable for the company as it decreases the liquidity of the receivables, but with a broader point of view, we can see that this minor increase in the Average Collection Period is due to the boost in sales during the period under analysis.

Average Payment Period

Average Payment Period indicates the liquidity of the firm's payables in days (Jackson, 2001, 30).

Interpretation

We can see the declining trend of the Average Payment Period which is unfavourable for the company as it increases the liquidity of the payables, which ultimately results in the cash outflow.

Fixed Asset Turnover

Fixed Asset Turnover measures the capacity utilization of the assets and the revenue generated from the utilization of these assets.

Interpretation

It can be observed from the above graph that the graph first went down and then goes up. We can say that in year 2008, Asda purchased new fixed Assets, which increases the value of fixed assets but could not boost sales to the same extent (may be purchased at the end of the ...