Question:
You are supposed to take a public company and write up a financial statement analysis focusing on interpretating key financial data. You need to incorporate into your assignment at least the following ratios:
– current ratio,
– quick ratio,
– return on asset and equity,
– debt ratio,
– basic earning power and market to book value.
Analysis over financial statements of a company is crucial; for all the stakeholders of the company. This analysis assists a stakeholder to make a better decision regarding the performance and the position of the company. Through this analysis, it has been found that the various tactics are available for the financial statement analyst to perform a better study over the financial statement of the company. In this report, ratio analysis study has been performed over the MARSHALL MOTOR HOLDINGS PLC to analyze the performance of the company and for better analysis, competitive company which is LOOKERS PLC also have been analyzed.
MARSHALL MOTOR HOLDINGS PLC is an international company which has its branches and subsidiary companies in around 27 countries. Further, it has been analyzed that the position of the company has been enhanced due to various changes into the financial position of the company. This company is operating its business in automotive industry. The main competition of the company is from LOOKERS PLC. This company designs and transports the commercial and public vehicle in the market (Home, 2017). Currently, this company has a contract with 25 brands of supplying their vehicles in the market.
For this report, ratio analysis study has been performed over MARSHALL MOTOR HOLDINGS PLC and LOOKERS PLC to make a better analysis study over the financial performance and the position of the company. Further, the recommendation and conclusion has been given according to the analysis over ratio analysis of both the companies.
Ratio analysis is a method of financial analysis which depict about the position of a company on various level such as profitability position, solvency position, efficiency position, liquidity position etc. (Hansen, Mowen & Madison, 2010). Following are the ratio analysis study of MARSHALL MOTOR HOLDINGS PLC:
|
Description |
Formula |
Marshall Holdings plc |
||||
|
2016 |
2015 |
2014 |
2013 |
2012 |
||
|
Profitability |
||||||
|
Net margin |
Net profit/revenues |
0.93% |
0.95% |
0.92% |
0.82% |
0.42% |
|
Return on equity |
Net profit/Equity |
12.19% |
9.02% |
15.03% |
12.74% |
5.91% |
|
Liquidity |
||||||
|
Current ratio |
Current assets/current liabilities |
0.81 |
1.06 |
0.95 |
1.01 |
1.01 |
|
Quick Ratio |
Current assets-Inventory/current liabilities |
0.16 |
0.23 |
0.30 |
0.37 |
0.30 |
|
Efficiency |
||||||
|
Receivables collection period |
Receivables/ Total sales*365 |
16.27 |
11.31 |
23.63 |
29.08 |
19.89 |
|
Payables collection period |
Payables/ Cost of sales*365 |
108.12 |
71.29 |
84.22 |
80.60 |
66.99 |
|
Asset turnover ratio |
Total sales/ Total assets |
2.37 |
2.71 |
3.07 |
3.05 |
3.27 |
|
Solvency |
||||||
|
Debt to Equity Ratio |
Debt/ Equity |
4.50 |
2.50 |
4.34 |
4.07 |
3.35 |
|
Debt to assets |
Debt/ Total assets |
0.82 |
0.71 |
0.81 |
0.80 |
0.77 |
|
Return on assets |
Net profit / Assets |
0.02 |
0.03 |
0.03 |
0.03 |
0.01 |
|
Return on equity |
Net Profit/ Equity |
0.12 |
0.09 |
0.15 |
0.13 |
0.06 |
|
P/E ratio |
Market value per share / dividend |
669.57 |
||||
|
Market to Book value |
Market value per share / Book value per share |
1.03 |
||||
|
Basic Earnings Power |
0.23 |
0.20 |
0.13 |
0.10 |
0.04 |
(Horngren, 2009)
Through this analysis, it has been found that the position and the performance of the company have been better in comparison of last 5 years. Further, for analyzing the performance in a better way, ratio analysis study has been performed over the LOOKERS PLC:
|
Description |
Formula |
Lookers Plc |
||||
|
2016 |
2015 |
2014 |
2013 |
2012 |
||
|
Profitability |
||||||
|
Net margin |
Net profit/revenues |
1.99% |
1.39% |
1.54% |
1.46% |
1.31% |
|
Return on equity |
Net profit/Equity |
23.79% |
17.06% |
18.22% |
15.84% |
13.28% |
|
Liquidity |
||||||
|
Current ratio |
Current assets/current liabilities |
1.04 |
1.05 |
1.09 |
1.08 |
1.09 |
|
Quick Ratio |
Current assets-Inventory/current liabilities |
0.29 |
0.30 |
0.33 |
0.35 |
0.34 |
|
Efficiency |
||||||
|
Receivables collection period |
Receivables/ Total sales*365 |
23.78 |
30.15 |
25.74 |
28.07 |
26.69 |
|
Payables collection period |
Payables/ Cost of sales*365 |
26.75 |
30.34 |
26.66 |
29.49 |
30.52 |
|
Asset turnover ratio |
Total sales/ Total assets |
2.39 |
2.30 |
2.71 |
2.59 |
2.47 |
|
Solvency |
||||||
|
Debt to Equity Ratio |
Debt/ Equity |
4.00 |
4.32 |
3.36 |
3.19 |
3.09 |
|
Debt to assets |
Debt/ Total assets |
0.80 |
0.81 |
0.77 |
0.76 |
0.76 |
|
Return on assets |
Net profit / Assets |
0.05 |
0.03 |
0.04 |
0.04 |
0.03 |
|
Return on equity |
Net Profit/ Equity |
0.24 |
0.17 |
0.18 |
0.16 |
0.13 |
|
P/E ratio |
Market value per share / dividend |
488.10 |
||||
|
Market to Book value |
Market value per share / Book value per share |
1.03 |
||||
|
Basic Earnings Power |
0.21 |
0.13 |
0.12 |
0.09 |
0.07 |
(Kinsky, 2011)
Through the study over both the companies, it has been found that the liquidity position of LOOKERS PLC is way better than the performance of the MARSHALL MOTOR HOLDINGS PLC. Through the analysis, it has also been found that the current ratio and quick ratio of the company is 0.18 and 0.16 whereas the LOOKERS PLC has 1.04 and 0.29 current ratio and quick ratio (Elton, Gruber, Brown & Goetzmann, 2009). This depict that the MARSHALL MOTOR HOLDINGS PLC is required to manage the position in a better way.
Further, the net profit and return on equity has also been analyzed over the MARSHALL MOTOR HOLDINGS PLC. Through the analysis, it has also been found that the net profit and return on equity of the company is 0.93% and 12.19% whereas the LOOKERS PLC has 1.99% and 23.79% net profit and return on equity (London stock exchange, 2017). This depict that the MARSHALL MOTOR HOLDINGS PLC is required to manage the position in a better way.
Further, the efficiency position of the company has been analyzed over the MARSHALL MOTOR HOLDINGS PLC. Through the analysis, it has also been found that the receivable collection period, payment payable days of the company is 16.27 days and 108.12 days whereas the LOOKERS PLC has 23.78 days and 26.75 days (Morningstar, 2017). This depict that the performance of MARSHALL MOTOR HOLDINGS PLC is bit better than LOOKERS PLC to manage the cash position of the company.
Lastly, the debt, equity and asset position of the company has been analyzed over the MARSHALL MOTOR HOLDINGS PLC. Through the analysis, it has also been found that the return on assets, return on equity and Profit earnings ratio of the company is 0.02, 0.12 and 669.57 whereas the LOOKERS PLC has 0.05, 0.24 and 488.10 (Morningstar, 2017). Market to book value of the company has also been analyzed and it has been found that the value of MARSHALL MOTOR HOLDINGS PLC is way better. This depict that the performance of MARSHALL MOTOR HOLDINGS PLC is quite bad than LOOKERS PLC to manage the capital structure position of the company.
Further, through the above analysis, it has been found that the position of the company in the market is bit better (Baker & Nofsinger, 2010). But for becoming the best and leader in the market, company is required to make various changes into the position and the performance of the company.
Conclusion:
Through the above study, it has been found that the financial analysis of MARSHALL MOTOR HOLDINGS PLC depicts that various changes have taken place into the stability and profitability position in last 5 years. Further, it has also been found that the position of the company in the market is bit better. This company is one of the largest companies in automotive industry. But the analysis over LOOKERS PLC depict that this company has managed the better performance of the financial data of the company. But for becoming the best and leader in the market, company is required to make various changes into the position and the performance of the company.
References:
London stock exchange. (2017). Marshall Motor holdings plc. Retrieved from https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00BVYB2Q58GBGBXASQ1.html available as on 26th Nov 2017
Morningstar. (2017). Marshall Motor holdings plc. Retrieved from https://financials.morningstar.com/ratios/r.html?t=MSLH available as on 26th Nov 2017
Lookers plc. (2017). Home. Retrieved from https://www.lookersplc.com/ available as on 26th Nov 2017
Morningstar. (2017). Lookers plc. Retrieved from https://financials.morningstar.com/ratios/r.html?t=LO6A available as on 26th Nov 2017
Baker, H.K. & Nofsinger, J.R. (2010). Behavioral Finance: Investors, Corporations, and Markets. John Wiley and Sons.
Elton, E.J., Gruber, M.J., Brown, S.J., & Goetzmann, W.N. (2009). Modern Portfolio Theory and Investment Analysis. John Wiley and Sons.
Hansen, D. R., Mowen, M. M. & Madison, T. (2010). Cornerstones of cost accounting. Issues in Accounting Education, 25(4), 790-791.
Horngren, C. T. (2009). Cost accounting: A managerial emphasis, 13/e. Pearson Education India.
Kinsky, R. (2011). Charting Made Simple: A Beginner’s Guide to Technical Analysis. John Wiley and Sons.
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