FINANCIAL ANALYSIS

Financial Analysis

Name of Writer

Name of Institution

Table of Contents

Case A3

Financial Analysis of Shoprite4

Liquidity Ratios4

Profitability Ratios5

Asset Turnover Ratios5

Market Ratios6

Morrison's Key Ratios6

Comparing Morrisons & Shoprite7

Liquidity Ratios7

Profitability Ratios7

Asset Turnover Ratios8

Market Ratios8

Discussion on Price Earnings Ratio9

Recommendations9

Case B10

References14

Financial Analysis

Case A

Overview

Shoprite is one of the key players in the African retail grocery store market and is the prime company that holds the chain of most grocery stores on the continent of Africa. The company is a based in South Africa and its stocks trade at the Johannesburg Stock Exchange, Namibian Stock Exchange and the Zambian Stock Exchange. The company had very humble beginnings when it first started in 1979 with only a chain of 8 supermarkets in Cape Town. The company purchased these 8 stores for a mere 1 million rand. From there on the company grew with the help of strategic and tactical acquisitions and expansions, and grew into a 72 billion Rand company, today. The company now has more than 7 brands under their belt and is still growing at a rapid growth rate.

As compare to the Shoprite, the Morrisons Plc is a much larger company in terms of profits, sales and revenues. However, in view of the growing demand of grocery store chains throughout the world taking over Shoprite will be more than a good strategy on part of the Morrisons team, in order to safeguard itself against the possible stagnation of the retail industry in the UK in the near future. To complete the acquisition of Shoprite it is highly viable that Morrisons looks into the company financials thoroughly and then decide upon the financial strength of both Shoprite and compare it with that of Morrisons.

In order to understand the financial highlights of Shoprite and to verify its financial viability as well as the decision to acquire it, The team of Morrisons have conducted the financial analysis of both the companies, which are provided below in a compare and contrast report style. However, the report provides much of its emphasis on the financials of Shoprite as compare to Morrisons, so as to gain the insights about the decision of acquisition of Shoprite.

Financial Analysis of Shoprite

Select a category of ratios

Financial Ratios

2011

2010

2009

2008

2007

Liquidity Analysis Ratio

Current Ratio

0.91

0.95

0.98

1.06

1

Liquidity Analysis Ratio

Quick Ratio

0.34

0.38

0.42

0.53

0.47

 

 

 

 

 

 

 

Profitability Analysis Ratio

Return on Asset

12.97

13.05

12.65

11.72

9.86

Profitability Analysis Ratio

Return on Equity

38.64

41.72

41.12

37.29

32.24

Profitability Analysis Ratio

Net Income Margin

 

 

 

 

 

 

 

 

 

 

 

 

Activity Asset Turnover Ratio

Asset Turnover

3.74

3.88

3.76

3.56

3.57

Activity Asset Turnover Ratio

Inventory Turnover

34.45

36.71

35.07

29.93

26.45

Activity Asset Turnover Ratio

Receivable Turnover

8.75

8.91

8.91

9.08

8.88

 

 

 

 

 

 

 

Capital Structure Analysis Ratio

Interest Coverage

68.24

-

-

-

-

 

 

 

 

 

 

 

Capital Market Analysis Ratio

Earnings Per Share

4.96

4.46

3.86

2.98

2.04

Capital Market Analysis Ratio

Price Earnings Ratio

23.5

22.81

24.9

22.07

20.78

Data for Financial Ratios for Shoprite is collected from Mergent Online

Liquidity Ratios

The liquidity ratios of Shoprite are very strong throughout the period of 5 years. However, there is a trend of decline in the liquidity ratios of the company. Nonetheless, the company's current ratio throughout the past 5 years have remained close to 1, which gives the indication that the company's management of the liquidity position of the company is very tight, and the company bears no risk and wants to keep its assets as liquid as ...