Finance and Operations

Finance and Operations

Introduction

The years 2011 and 2012 are the recovery phase for many of the multinational chains all over the world after the severe financial crisis of 2008. Debenhams is a retail store that is offering all kinds of products to its customers. Debenhams is currently providing different kinds of products and services in 66 countries of the world. Over the year's multi-brand have become the largest promoters of UK culture in all parts of the world. Debenhams provide a wide range of brands in women and men clothing shoes, clothes, sportswear, perfumes, household items, bags and etc. It is providing its customers with a unique range of products, differentiated products, and a mix of all the brands that is international, local or even its own brand. A financial analysis report of Debenhams will provide a view of its performance in terms of its finances and comparing the financial performance of Debenhams with competitors Marks & Spencer will provide a clear view of performance of both the rivals in terms of finance in the market.

Discussion

Debenhams is currently running 240 stores in more than 28 countries of the world. It is the largest departmental store in Britain since 1778, since then the store was acquired and recreated till today it is successfully providing a wide range of products of different brands under one roof. Ratio Analysis is the best way to analyse the financial performance of any organization, chain or business. The ratio analysis of Debenhams with Marks & Spencer will provide a better understanding of their financial position in the market. The financial ratios are divided into four categories that provide financial analysis in terms of profitability, liquidity, activities, leverage and analysis of the investors coming and out of the firm.

According to Gitman and McDaniel (2008, pp.383) the profitability ratios of a firm shows the ability of the firm how it has manage its resources in order to generate more and more profits. The gross profit margin shows a change of 1% which means that the firm has able to control its cost to increase more gross profit from 2011 to 2012. The Net Profit Margin and Return on Capital Employed has remained unchanged which means that although the firm has been able to control its cost but it has not controlled its expenses which kept the net profit margin the same. On the other side its competitors profitability ratios show negative changes which means that from 2011 to 2012 Marks & Spencer profits have declined. According to Brigham and Houston (2011, pp.87) liquidity ratios provide an analysis of the relation between the current assets, cash and the firm's current liabilities. Debenhams current ratio and quick ratio have increased in 2012 as compared to 2011 but Marks & Spencer achieve an ideal current ratio of 2 which means for every one liability they have two assets available. Although it is an ideal situation but many analysts view that may be the firm resources are left idle instead of investing ...