BUSINESS RISK AND CORPORATE FAILURE

Business Risk and Corporate Failure

Business Risk and Corporate Failure

Introduction

Imperial Tobacco Group is a tobacco company based in the United Kingdom. Company manufactures, markets, distributes and sells a range of cigarettes, tobaccos, cigars, rolling papers and tubes. Company's brand portfolio includes Davidoff, Gauloises, West, JPS, Van Nelle, Drum, Golden Virginia and Montecristo.

However, the competitor of Imperial Tobacco Group that is British American Tobacco is a holding company. Company owns directly or indirectly, investments in the numerous companies constituting the British American Tobacco Group of companies. Through its subsidiaries, company is engaged in the manufacture, distribution or sale of tobacco products. Company's cigarettes and cigars brands include Dunhill, Kent, Lucky Strike and Pall Mall.

Context

This paper focuses on the financial status of Imperial Tobacco Group for 3 years with its competitor British American Tobacco, from 2009 to 2011. This study will describe the importance of choosing the right strategy. Internal and external analysis of Imperial Tobacco Group is made in order to maintain the status as the low cost; it includes the model of the strategy in use (Andrews, 1994, 193-218). The strategic choice of Imperial Tobacco Group makes the company a leader in the industry. The company has become an example in the strategic management because of its successful implementation of the strategy (Aggarwal, 1996, 12-36). Internal and external analysis of Imperial Tobacco Group shows the set of managerial decisions and actions that determine the long run performance of a group. It includes environmental scanning, strategy formulation, strategy implementation and evaluation and control (Andrews and Willett, 1997, 479-511).

Ratios of Imperial Tobacco Group (For Working See Appendix)

As it is known that the most important factors in the well being of a business, is to see that it operates at a profit and to organize it in order to be able to meet its liabilities at appropriate times, also the sufficient liquidity. If any of these points not covered efficiently it could mean that the business might have to be closed down. This is the reason why we choose to calculate profitability and liquidity ratios which are the most important and reliable guides (Anthony and Marcia, 2005, 14-16). In addition, various past studies states that we decide to calculate activity ratios in order to see how efficiently the company like Imperial Tobacco Group has managed its debt management ratios, asset management ratios and per share values to commend upon the Imperial Tobacco Group's sources of finance and whether a risk arises from the financial performance of the company.

Profitability Ratios

09/30/2011

09/30/2010

09/30/2009

ROA % (Net)

5.87

4.81

2.17

ROE % (Net)

24.46

22.19

10.32

ROI % (Operating)

14.98

14.04

12.56

EBITDA Margin %

9.35

9.71

6.35

Calculated Tax Rate %

15.65

28.14

28.36

Liquidity Ratios

09/30/2011

09/30/2010

09/30/2009

Quick Ratio

0.38

0.41

0.35

Current Ratio

0.7

0.78

0.64

Net Current Assets % TA

(10.57)

(6.72)

(13.02)

Debt Management

09/30/2011

09/30/2010

09/30/2009

LT Debt to Equity

1.06

1.43

1.46

Total Debt to Equity

1.33

1.47

1.85

Interest Coverage

4.7

4.21

3.34

Asset Management

09/30/2011

09/30/2010

09/30/2009

Total Asset Turnover

0.96

0.9

0.87

Receivables Turnover

9.91

9.37

8.9

Inventory Turnover

7.83

7.64

7.33

Accounts Payable Turnover

24.18

22.58

22.64

Accrued Expenses Turnover

4.86

4.78

5.03

Property Plant & Equip Turnover

14.58

14.15

13.84

Cash & Equivalents Turnover

30.06

31.15

31.61

Per Share

09/30/2011

09/30/2010

09/30/2009

Cash Flow per Share

2.52

2.82

3.53

Book Value per Share

7.17

6.9

6.43

Evaluation

Profitability Ratios

The profitability of Imperial Tobacco Group is satisfactory as the trends of the company from 2009 to 2011 shows that the company has been increasing its profits. This statement can be endorsed by the evaluation of the profitability ...