ADVANCED FINANCIAL REPORTING ASSIGNMENT

Advanced Financial Reporting Assignment

Advanced Financial Reporting Assignment

Introduction

We have conducted a comprehensive analysis and evaluation of two FTSE 100 listed companies, Ted Baker plc and French Connection plc respectively. In the report we have attempted to determine the investment feasibility of both companies and evaluate as to which of the either company would be suitable from investment point of view. The respective companies belong to the market of clothing retailing and are globally renowned brands, with operations in multiple countries.

Overview of Ted Baker plc

Ted Baker plc is primarily a clothing retailing business. It produces a wide range of clothing that includes garments for men and women, night garments, children garments, fragrances, skin wears, footwears, neckwears, eyewears and watches.

Overview of French Connection plc

French Connection is one of the most recognised fashion brands on the high street. It is known to be operating in more than thirty countries world wide. French Connection was conceived in 1972. The aim of French Connection operations is to generate an increased shareholder value through the selling fashion products.

Analysis

Financial Overview of Ted Baker plc

Ted Baker plc's financial position on 26 January'2013 can be regarded as satisfactory. The data shows that the revenue earned by the company as at the mentioned date amounts to £254,466,000. It can also be observed that the operating profit earned was around £29,514,000. The profit for the period of the company amounted to £21,597,000. The company's property, plant and equipment as at that date is reported to be £45,412,000 (Tedbakerplc.com. 2013). The non-current assets amounted to £6,873 and the working capital is £47,105,000. The non-current liabilities amounts to £497,000 and can be described as a relatively small figure. Hence, the net asset worth of Ted Baker plc amounts to £98,893,000. The entire financing has been financed by the shareholders' equities of £98,893,000.

Profitability Ratio

Profitability ratios determine the control of company's expenditure and deployment of the assets in the attempt to achieve an appropriate rate of return of return. One of the ratios in this category is that of return on assets. Return on assets is the net income that is being earned over the net assets. It can be observed in the data that the company is earning a return on assets of 21.84 per cent in 2013, against the rate of 20.6 per cent in 2012. This is a positive indicator as the returns have increased over the time. However if taken into full context, it can be observed that the company was achieving a rate of 22 per cent in 2011 and the ROA were on an increasing trend until 2012, when it declined a little. Hence, the rate has relatively declined over the period, but an increase in 2012 is an indicator of an upwards trend in the return on assets ratio, and they can be anticipated to increase in future.

Return on equity is the measure of the net income that has been earned over the shareholders' equity that has been ...