The report focuses on the financial analysis of two companies which are Zoopla Company and Rightmove Company. The report will aim to reveal the strength and weaknesses of the financial reports which will also reflect analysis of important ratios (Gitman, Juchau and Flanagan 2015). This report is being conducted from the view point of investors of Zoopla Company who is considering whether the performance of their company is better or their rival company which is Rightmove Company is better.
Zoopla ltd is a public company which has its headquarters in London, United Kingdom. The company is engaged in digital media business and real estate business. The company focuses on supplying users with information about houses which are being sold, estimated areas of properties, current value estimates in UK. Some of its services are uswitch, price comparison, location analysis.
Rightmove plc is a public company which has its headquarter in London, United Kingdom. This company has the largest online real estate website offering a wide range of options to its buyers. The company is engaged in real estate business and digital media business.
The annual balance sheet of Zoopla Company shows that it has a decent amount of cash in at the year end 2017 which is of the amount £ 75368000 which is more than previous years which suggests that the company has decent liquid cash available with the business and therefore the company can meet its liquidity requirements in present. The company has lower amount of debtors in the year end 2017 as compared to in 2016 which is £ 15000000 as compared to £ 36615000 (Zpg.co.uk 2018). The company’s current assets has also increased in 2017 which is £ 113899000 as compared to 2016 figure of £ 39982000. This shows the tremendous amount of increase in the value of current assets specially cash and cash equivalent figures. In fact the current assets figure in 2017 is much more than previous year figures (Bobryshev et al. 2013). Thus it shows that company has access to cash and will have no liquidity issues. There are also presences of in tangibles assets in the balance sheet like goodwill and patents which is consistent with past years figures. While on the liability side the company use of long term loans has increased in 2017 which is £ 266865000 which is more than £ 149696000 in 2016. Thus it shows the company use of debt capital in the business. The companies total liabilities has also increased in 2017 as compared to the figure of 2016. The company has a retained earnings of £ 79595000 in 2017 which is more than £ 55752000 in 2016 which is a strenght in business as the company than has an option of using this to reinvest in business or distribute the same as profit in future. The company’s equity has also increased from £ 142227 in 2016 to £ 239941 which shows that the company has issued more shares in the market (Zpg.co.uk 2018).
The annual balance sheet of Rightmove Company shows that there is an increasing trend in the value of cash as shown in the balance sheet considering current and previous years. The cash and cash equivalent figure is £ 13749000 which as compared to 2016 was £ 8418000 and therefore it is on an increasing trend. The figure of debtor as shown in th dbalance sheet for 2017 is £ 127000 and such figure in 2016 was £ 59000 (Rightmove.co.uk. 2018). The figure has thus increased from past years results. The total current assets figure is also on the rise which depict a figure of £ 47699000 in 2017 which is much more than the figure in 2016 that is £ 39941000. The company has intangible assets which are goodwill, patents and software. The company liabilities side of balance sheet shows that the company does not have any long term liabilities. However the total liabilities figures in 2017 is £ 52412000 which has increased from the figure of total liabilities in 2016 (Rightmove.co.uk 2018). This is mainly due to increased amount of current liabilities in the year. The equity figure as compared to previous year has increased that is it was £ 6637000 in 2016 and £ 8042000 in 2017. The company has a retained earnings of £ 21057000 which is more than the previous year figure.
Overall Findings
The overall findings from the view point of the investor is that overall cash balance of Zoopla Plc is much more than Righmove Plc which suggest that the liquidity of the Zoopla Plc is much more than Rightmove Plc. The debtors of Zoopla plc is more than Rightmove plc which suggests that the former company is liberal about its credit sales policies and has a decent rolling period which is established the liquid cash available with the company (Al-Najjar 2013). Zoopla Plc also uses long term debts in its capital structure which is a strong point in the capital structure. Rightmove Plc does not do not use any debt capital in the capital structure and thus it only uses of equity capital in its capital structure. The retained earnings of Zoopla Plc is much more than Rightmove Plc which implies that the company has necessary reserves which can be used in case of an emergency situation (Anjum and Malik 2013).
The total revenue earned by Zoopla Company in the year of 2017 is around £ 244538000 which is more than the figure of 2016 that is £ 197728000. The total revenue of past four years show that the company is doing exceptionally well as operating income and total revenue both are on the rise since last four years (Weil, Schipper and Francis 2013). The figure of total revenue has increased from 2015 tremendously. The operating expense of the company is also more than what it was in the previous year. The net income however has just marginally increased which is due to high operating costs and other expenses related to that year (Healy and Palepu 2012).
The total revenue of Rightmove Company in the year of 2017 is around £ 219993000 which has increased more than previous year’s figure which is £ 192129000. The revenue of the company has increased in the current year which shows that the company is doing well. The operating expense of the company is also more than the figure which was present in previous year. The net income figure which is £ 129542000 in 2017 as compared to a net income figure of £ 109468000 in 2016 of Rightmove Company.
Overall Findings
The total revenue earned by Zoopla Ltd in the year 2017 is much more than Rightmove Ltd. The reason is also clear as the former company utilizes debt capital which is less costly as a source of capital and it also adds more capacity for production and revenue generations. The operating expenses of Zoopla Company is naturally more because of presence of interests on borrowings and due to more production the variable cost will also be more. The net income figure of Zoopla Company is much more than Rightmove Company which shows the company is generating more profits. Generally net profit is a standard of measuring the performance of the company which is employed by shareholders. The decision of shareholders whether to invest in the company relies on net profit and some other factors.
The cash flow statement of Zoopla Company shows that the company has positive cash flow from operating activities and it is slightly more than previous year’s figure. The cash from operating activities is £ 37409000 in 2017. The cash from investing activities is negative due to acquisitions of subsidiaries which the company has made during the year. The net cash flow from all activities is also a positive figure (Bhandari and Iyer 2013). The cash flow statement shows that the company is performing well.
The cash flow statement of Rightmove Company shows that the company has net cash flow which is positive. However the company’s cash from operating activities has not much grown from the last year. The cash from investing activities is £ 129542000 which is much more than the previous year which shows that the company is more involved in investing activities mainly money market deposits.
Overall Findings
Zoopla Company has a better Cash flow as compared to Rightmove Company which are an indicators to the stakeholders that Zoopla Company has the upperhand over its rivals Rightmove Company.
The profitability ratios of the company consist of gross margin, net margin and operating margin. The profitability ratio of the company shows that the company is performing well. As per the profitability ratios the company is earning profits and the profits are showing growth. The liquidity ratio consists of quick ratio, current ratio which are key indicators of the performance of the company. Zoopla Company has sufficient cash reserves and therefore the company has no problem of liquidity. Gearing ratios show the use of debt capital in comparison to equity. As per the balance sheet analysis the company uses significant amount of debt capital in its capital structure.
The liquidity ratio is not favourable for the company as the working capital by total capital is in negative. This means that the company has low working capital which suggests that the company has liquidity issues and the quick ratio depict that it is 0.9 which is less than 1, therefore the company is having some problems meeting their current expenses. The profitability ratios however show an exceptional good performance starting from the gross profit margin to net profit margin. Every profitability ratio show an increasing trend except EBIT margin which has slightly decreased. The balance sheet analysis show that the company does not uses debt in their capital structure.
Overall Findings
The ratios analysis of both the company depict a similar results, however the profitability ratios show that Rightmove Company is better than Zoopla Company. The ratio analysis of both the company shows favourable results.
The growth rate in EPS in Zoopla Company has decreased and shows negative growth rate while the growth rate in EPS in Rightmove Company is increasing and shows promising growth rate. Zoopla company ‘s dividend yield is much more than the Rightmove company which shows the Zoopla company is paying a dividend which is more as compared to its prices of shares than Rightmove company.
Conclusion
Thus it is clear from the analysis of the financial report of Zoopla Company in comparison to Rightmove Company that the performance of Zoopla Company is better than Rightmove Company. Zoopla Company has a better liquidity conditions with a better net profit as compared to Rightmove Company. Zoopla company has retained earnings which can be used by the company in case of an emergency situations. The investors will be naturally be attracted to Zoopla Company as most of the financial indicators. Therefore it is clear that the performance of the Zoopla Company is better than Rightmove Company.
Reference
Al-Najjar, B., 2013. The financial determinants of corporate cash holdings: Evidence from some emerging markets. International business review, 22(1), pp.77-88.
Anjum, S. and Malik, Q.A., 2013. Determinants of corporate liquidity-An analysis of cash holdings. Journal of Business and Management, 7(2), pp.94-100.
Bhandari, S.B. and Iyer, R., 2013. Predicting business failure using cash flow statement based measures. Managerial Finance, 39(7), pp.667-676.
Bobryshev, A.N., Uryadova, T.N., Lyubenkova, E.P., Yakovenko, V.S. and Alekseeva, O.A., 2014. Analytical and management approaches to modeling of the accounting balance sheet. Life Science Journal, 11(8), pp.502-506.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Healy, P.M. and Palepu, K.G., 2012. Business analysis valuation: Using financial statements. Cengage Learning.
Rightmove.co.uk. (2018). Rightmove.co.uk. [online] Available at: https://www.rightmove.co.uk/ [Accessed 6 Jan. 2018].
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.
Zpg.co.uk. (2018). The consumer champion at the heart of the home. [online] Available at: https://www.zpg.co.uk/ [Accessed 6 Jan. 2018].
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