ANALYSIS OF PERFORMANCE RATIOS

Analysis of Performace Ratios

Analysis of Performance Ratios

Introduction

The purpose of this paper will be to analyze a reputed corporation known as “Marks and Spencer.” The nature of the analysis will be referred to the financial aspect of the corporation. The balance sheet and income statement of the corporation will be the basic tools on the basis of which the analysis will be conducted. This financial analysis will be covering the financial statements of this organization from the years 2007 to 2011. The core purpose of this financial statement is to calculate various types of performance ratios of this corporation. These ratios will include solvency ratios, profitability ratios, shareholder ratios, long term ratios and working capital ratio. There are other methods also available for analyzing an organization's performance which includes common size, industry and horizontal analysis. These different types of analysis enable us to know the performance of the company (Lee, 2009, pp. 20). The main purpose of this paper will be to analyze the financial performance of the selected organization through the financial statement of this organization

Objective

The core objective of this paper is to highlight the achievements of “Marks and Spencer” over the past five years 2007 - 2011. In addition to the achievements, the financial weaknesses of this organization will also be highlighted.

Company's Background

Marks and Spencer is a British company, and the main operations of this company are related to the field of retailing. This company was founded by Michael Marks and Thomas Spencer in 1884. The company's headquarter is located at Westminster City, London. Marks and Spencer has around 703 stores operating in England and 400 stores operating across the world.

Performance Ratio

The following table demonstrates an overview of the company's financial performance on the basis of different performance ratios.

Marks and Spencer

Profitability Ratios

04/02/2011

04/03/2010

03/28/2009

03/29/2008

03/31/2007

ROA % (Net)

8.47

7.19

7.07

13.14

12.5

ROE % (Net)

25.35

24.36

25.23

45.73

47.23

ROI % (Operating)

15.15

15.37

16.64

28.04

29.34

Liquidity Ratios

Quick Ratio

0.41

0.42

0.3

0.3

0.26

Current Ratio

0.74

0.8

0.6

0.59

0.53

Debt Management

LT Debt to Equity

0.72

1.05

1.02

0.99

0.75

Financial Leverage ratio

0.94

1.27

1.47

1.44

1.03

Interest Coverage

5.63

5.87

5.43

10

127.76

Asset Management

Total Asset Turnover

1.35

1.3

1.26

1.44

1.63

Receivables Turnover

44.33

44

42.3

44.15

51.52

Inventory Turnover

9.27

10.3

11.1

12.23

13.27

Accounts Payable Turnover

11.41

16.33

31.13

37.18

34.29

Cash & Equivalents Turnover

22.3

22.64

24.53

36.33

31.74

Per Share

Cash Flow per Share

0.76

0.77

0.82

0.64

0.77

Book Value per Share

1.69

1.37

1.32

1.23

0.97

Analysis

It is very clearly demonstrated in the above mentioned table that the return on assets is has been decreasing over past five years. In addition to this, the company also experiences a decrease in the return on equity during this time period. It has been observed that that the decrease in return on equity is higher than the decrease in return on asset. Further, it is observed that there is improvement in ...