ACCOUNTING ANALYSIS

Accounting Analysis

Introduction

The company I have selected for the accounting analysis of the company is ITV plc, listed on London Stock Exchange. The company operates in the Media industry, and is the largest commercial television network in the United Kingdom. The television network has various family channels operating in UK including ITV1 etc. the content is broadcasted over multiple platforms through ITV player and itv.com (Itvplc, 2013). The content is funded by sponsorships and advertising revenues along with the competition of viewership and voting. The channel is most popular and commercial channel in United Kingdom. The company has the market share of around 45% of television advertising market of UK (Itvplc, 2013). The recent channel is launched in high definition version (ITV1, ITV1+1), these all channels can be viewed on Sky and Freeview. The company is entitled to entertainment industry, and therefore sells programmes and formats not only in UK but in the worldwide.

User Group 1: Owners

Every stakeholder of the company can get useful information from ratios. Since, looking at the financial statements one cannot reach at the decision to analyse the current company's performance, profitably solvency etc. Therefore, ratios provide quick and easy way for each of the stakeholder or users of the financial statements regarding the overall performance of the company (Maguire, 2007, Collis et al., 2012).

Business owners need the financial ratios so as to have the comparative analysis of the company and set the benchmarks accordingly. Similarly, in comparative analysis owners can evaluate the performance of the company against competitors. The ratios for owners will not only allow owners to compare with the company with the similar operation, but that of different companies having different business operations. Below are the two calculated profitability ratios along with the chart over the profitability of the ITV plc over period of last 5 years.

Profitability Ratios

The return on capital employed ratio measures how efficiently company has allocated capital in the profitable investments. Moreover, the results obtained through this ratio give sense of company's ability to generate return over its projects. So, by looking at the ratio results in the table (see table 1) and the chart below, it is quite clear that company has done overall good except in the year 2008. The return on capital invested in 2008 was negative 120%, but the company has progressed better in the later years and generated the return of around 4, 12, 11, and 13% in 2009, 2010, 2011, and 2012 respectively.

These results are depicted through the bar chart above, as the long bar in the year 2008 is going down, and has progressed in the later years. Therefore, overall in the past 5 years company has recovered well enough after the year 2008. The possible reasons for this sharp decline might be due to the global financial crisis in the year 2008, or the other reason might be the unavailability of the attractive investment projects. Yet, the industry might have declined in the year 2008, following the global economic ...