MANAGING FINANCE

Managing Finance



Managing Finance

Introduction

The report analyzes the financial performance of the Premier Foods PLC and provides recommendations for the investment decision in the company. Premier Foods is engaged in food manufacturing, processing and distribution. Premier Foods' operates in three divisions that are Grocery, Hovis and Chilled. Grocery division comprises the shelf stable or ambient grocery products. Hovis segment comprises wrapped bread, morning goods and bulk and bagged flour. The chilled segment comprises chilled and frozen meat-free products and its retailer branded chilled ready meal and cake businesses. Premier Foods' broad range of customers including the major multiple retailers, wholesalers, foodservice providers and other food manufacturers. Company's brands include Hovis, Batchelors, Mr. Kipling, Quorn, Bisto, Ambrosia, Branston, Sharwood's, Hartley's, Loyd Grossman and Oxo (Premier Foods, 2011).

This report focuses on the financial status of Premier Foods plc for 2 years that is from 2009 to 2010. This study will describe the importance of choosing the right strategy. Internal and external analysis of Premier Foods is made in order to maintain the status in the market. It includes the model of the strategy in use. The strategic choice of Premier Foods 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. Internal and external analysis of Premier Foods shows the set of managerial decisions and actions that determine the long run performance of a corporation. It includes environmental scanning, strategy formulation, strategy implementation and evaluation and control.

Financial Analysis of Premier Foods PLC

The financial performance of Premier Foods plc shows that the major portion of the company's assets is comprised of liabilities, which is not a good indication for the company as the company's short term and the long term debts are increasing. However, the company's equity seems good or satisfactory but it should be high as compare to the liabilities. In addition to this, the total assets per share and net assets per share reflect that the Premier Foods plc's assets structure is in good shape which shows that the company can meet its financial obligations that is liabilities is some sort of financial loss occur. In addition to this, past studies states that the financial analysis are to determine whether there are liquidity problems, the study of profitability determines the evolution of the company and return on invested capital, management and analysis of related variables involved in the short term financing, obtaining rotations and time of collection and payment means (Vandyck, 2006, 101).

Ratio Analysis

Profitability Ratios

2010

2009

2008

2007

2006

ROA % (Net)

(2.76)

0.65

(10.81)

(2.29)

4.11

ROE % (Net)

(9.67)

2.45

(36.1)

(6.59)

21.26

ROI % (Operating)

3.94

6.73

(1.37)

3.61

11.63

Liquidity Ratios

2010

2009

2008

2007

2006

Quick Ratio

0.33

0.4

0.33

0.47

0.54

Current Ratio

0.9

0.67

0.71

0.8

0.92

Debt Management Ratios

2010

2009

2008

2007

2006

LT Debt to Equity

1.1

1.16

1.65

1.05

1.12

Total Debt to Equity

1.3

1.3

1.82

1.12

1.41

Interest Coverage

12.16

23.06

-

9.94

12.75

Efficiency Ratios

2010

2009

2008

2007

2006

Assets to Sales Ratio

1.52

1.54

1.53

1.57

1.6

Trade Payable to Sales Ratio

0.16

0.16

0.17

0.15

0.18

Days to Sales Inventory

46 days

47 days

49 days

51 days

53 days

Per Share

2010

2009

2008

2007

2006

Cash Flow per Share

0.08

0.03

0.1

0.35

0.11

Book Value per Share

0.41

0.44

1.17

1.73

0.93

(The formulas used for calculation are shown in Appendix 1)

Profitability Ratios

The profitability of Premier Foods is unsatisfactory as the trends of the company from 2009 to 2010 shows that the company has been losing its ...