Tests has over 530,000 colleagues over 12 countries serving up to 75 million transactions every week. J. Ginsburg is into grocery, retail and financial services. It has a 16. 8% ELK market share. It has 157,000 colleagues, 23 million customer transactions per week, and 1, 106 stores. The information in appendix 4 and 5 was extracted from both companies’ annual reports, for Kingsbury year ended March 2013 and February’s for Tests. ROCK- Return on capital employed An operating profit of E. 25 was made on every E 100 of capital employed from Sunburst’s. Compared to Tests, an operating profit of E. 02 was made on every El 00.
Looking at the two figures Ginsburg utilizes their capital more efficiently than Tests, because looking at their revenue scale Tests is has 21 88 compared to Ginsburg which only has 887. Using the 10 year benchmark in the I-J, the risk free return rate is at 2. 87% in the KICK( (Bloomberg). Therefore comparing Tests and Ginsburg against the risk free return they are both performing well. Gross profit J. Ginsburg made E. 48 in gross profit for every E 100 of revenue whilst Tests is performing better at E. 1 in every E 100. The higher the gross profit margin the likelihood of a business retraining each pound of sales they make.
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However a lower gross profit margin may indicate that the organization may be generating lower revenue to pay for its net profit and any expenses. Operating profit The operating profit margin is lower than the gross profit margin. For every El 00 J. Ginsburg makes in sales they have a E. 81 profit. Whist Tests is making a profit of E. 38 for every E 100. The flaws in using this ratio is that some companies can have a low profit margin and still be very profitable just eke both companies. Both of these companies have a low profit margin but they have huge volume which results in huge profit at the end.
If they were to increase their profit margin, they would increase their prices but they would end up losing volume and probably become not profitable. Although Deco’s operating profit margin is slightly more than J. Ginsburg it might indicate better cost and expense management. Current ratio J. Ginsburg has E. 61 of current assets for every El of current liabilities in 2013. This indicates that there will be no problem for J. Sunburst’s in covering heir current liabilities if their current creditors had to be all paid at once. Tests also has SEC. 70 for every El Of current liability.
They also are able to pay back their current creditors if needs be. Both of these companies current ratio is low and this could be bad for creditors because they might not be able to pay back their creditors within the next 12 months. The current ratio being low can also be good for shareholders to see because it might indicate efficiency in using short term assets. Acid test Current assets include the inventory which cannot be converted into cash at a worth term notice (Accounting for managers 201 2) therefore the acid test ratio is the ratio which takes this into account.
It seems that both companies have negative acid test calculations. J. Ginsburg has E. 30 of liquid assets for every El of their current liabilities in 2013. Tests currently has slightly more liquid assets than Ginsburg; however they only have E. 49 of liquid assets for every El of their current liabilities. The cash flow that comes into these businesses on a day to day basis is likely to ensure that they meets their payable when hey are due, however both these companies may face a threat with the creditors since their liquidity is not enough to pay off their outstanding credit.
Gearing Gearing if the amount of borrowings relative to shareholders equity (Accounting for managers 2012). J. Kingsbury gearing in 201 3 was lower, with long-term debt up to 29. 04% compared to Tests which was at 46. 50%. It is apparent that both companies are low geared which means they both have significantly less long term debt than equity. However J. Ginsburg is less geared than Tests. The advantages of low gearing for J. Ginsburg is that they would have small loan repayments at the end of a loan period and also low interests.
However this could possibly slow down their expansion which will restrict potential dividend growth. Identify and discuss possible users of your analysis and their differing information requirements The possible users for Tests and Ginsburg could be the stakeholders, which mean anyone that has an interest in the business doing well. The main stakeholders for these companies are the present and potential investors. The information that they would require would be the level on operating refit to check whether the businesses profit than if it is better than the average risk rate.
They would need to identify wither the business is stable enough for them to invest into. The possible users also are the suppliers. They would be looking at the gearing ratio and credit history before their supply their products to the businesses. If they find that the company IS highly geared they are less likely to get their money back as these business would have a high risk of failing to repay back the amount they owe. Employees have a huge interest in how the business is doing. They would be cooking into the annual reports checking the future plans of the company and their financial performance.
They would also be looking whether the business is cutting down on jobs or even having future employment benefits put at risk. Another possible user would be the competitors. They would want to look at the financial reports in order to check the business stability, whether they are doing better than they were doing in previous years of actually going down. The have a keen interest in seeing whether they could compare their sales and expenses against their own and look whether they could improve.
Provide a short discussion on the importance of supplementing financial analysis with non-financial considerations Despite financial ratio being useful, they can have a disadvantage of only replying on them. One of the key disadvantages is that a lot of companies operate in different industries of which each have different environmental conditions such as the regulations that apply to. If a company which was in retail was comparing their financial information with a food store, the comparison of the two companies from different industries might be misleading.
Supplementing financial measures would be acknowledged because it identifies the position in which the business stands. Looking at non-financial considerations, Tests and Ginsburg can check their competition whether they are doing something different to them and if they can improve on their operations. If a competitor has better access to certain resources, those resources cannot be accessed from the financial statement that’s when looking at the non-financial information can be beneficial for a business to look at.