PRUDENTIAL PLC

Prudential Plc

Prudential Plc Financial Analysis

Introduction

Prudential plc is a United Kingdom-based financial services company. The company has over 21 million customers worldwide. As well as the UK arm of its operations it has operations in 12 countries in Asia and owns Jackson National Life in the United States. It founded the Egg internet bank, which it sold to Citigroup in 2008. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Financial Performance

In the current situation of Prudential Plc, ratio analysis possess a very important role in determining the past, present and future outlook of the company. Ratio analysis is the most extensively used form of financial analysis. In this section, ratio analysis is aimed at characterizing the firm in a few basic dimensions considered fundamental to assess the financial health of Prudential Plc. We will compare the ratios of 2007 and 2008 in order to determine the financial health of Prudential Plc

Profitability Ratios

Profitability ratios are the projection of how successfully the firm is managing its assets and debts. Actually, profitability ratios measure the ability of the firm to generate earnings or how successfully the firm has generated earnings over a period of time. Profitability ratios are the indicators of the success or failure of the firms' activities.

ROA = Net Income + Interest Expenses/Total Assets

ROA 2008 = (4,397,648+22,969) / 11,817,756

= 37.4%

ROA 2007 = (1,667,985 + 71,943) / 6,592,536

= 26.4%

The return on assets ratio shows that how effectively the assets of Prudential Plc are working to generate profit. According to the situation of the above calculated figures, we can say that the return on assets has increased. This is a positive sign for the company as its earnings are increasing in accordance with the assets.

ROE = Net Income + Interest / Common Equity

ROE 2008 = (4,397,648+22,969) / 7,615,512

= 58%

ROE 2007 = (1,667,985 + 71,943) / 3,217,864

= 54%

Return on equity ratio is a comparison of the amount of earnings and the shareholders' equity. This ratio shows the investors that how much the company has earned in contrast to the amount of shareholder' equity. The trend in the return on equity is positive. This means that the earnings are increasing in comparison to the shareholders' equity.

Sales Margin = (Sales - Operating Expenses) / Sales

Sales Margin 2008 = (34,937,800 -9,293,962) / 34,937,800 = 73.4%

Sales Margin 2007 = (17,785,896 -5,162,044) / 17,785,896

= 70.9%

Liquidity Ratios

Liquidity ratios determine the firms' ability to pay back her debt in time. This is a major influencing factor in the performance of any firm. The basic premise of the liquidity ratios is to determine the liquidity of the firm. In this section, we will focus on the current ratio only as it is the main determinant of a firms' liquidity.

Current Ratio = current assets / current liabilities

CR 2008 = 10,883,862/4,151,203

= 2.62

CR 2007= 5,989,452/3,281,588

= 1.82

From the above figures, it is clear that the trend in the current ratio is increasing which means that Prudential Plc is facing excess liquidity position in ...