Irelands Greencore Group - Case Study Example

December 24, Greencore Question Irelands’ Greencore Group sells food products. Specifically, the company sells sandwich products. Another product type is cakes. A third food type is ready to eat food products (Greencore, 2013). Question 2: The auditor’s report affirms to the whole world that the Greencore Group’s financial reports are true as well as fair view. The financial reports comply with IFRS reporting standards. The report affirms to all concerned that the Greencore Group financial statements comply with local GAAP standards and Companies Acts (both 2012 and 193 versions) benchmarks (Greencore, 2013). Question 3: Table 1(Greencore, 2013) Profitability (Wahlen et al., 2010) a) Return on equity. The 2013 return on equity is 28 percent. On the other hand, the 2012 return on equity shows an unfavourably lower 18 percent output. Comparing the 2013 return on equity output with the industry ratio, the company’s 28 percent ratio is favourably higher than the average industry return on equity ratio of 19 percent. b) Gross profit margin. Both years generated a similar 30 percent output. Comparing the 2013 28 percent gross profit ratio output with the industry ratio, the company performed financially better than the 10 percent average industry gross profit ratio. c) Net profit margin. The 2013 net profit ratio output is 6 percent. On the other hand, the 2012 net profit ratio performance an unfavourably lower 3 percent output. Comparing the 2013 6 percent net profit ratio output with the industry ratio, the company performed financially better than the 3 percent average industry net profit ratio output. Liquidity (Wahlen et al., 2010) d) Current ratio. The 2013 current ratio output is unfavourable at 0.47. On the other hand, the 2012 current ratio shows a more unfavourably lower 0.37. Comparing the 2013 current ratio output with the industry current ratio, the industry average current ratio is better than the company’s 0.47current ratio. The industry average current ratio is company’s 1.70. The ratio indicates there are not enough current assets reserved for the payment of currently maturing debts. Asset Management (Wahlen et al., 2010) e) Inventory (stock) turnover period. In terms of number of days converting inventory into cash, the company’s inventory turnover period for 2013 is 7.53 days. The 2012 annual period’s inventory turnover period, 10 days, is financially less favourable than the 2013 accounting period’s output. Comparing the 2013 inventory turnover ratio of 7.53 days, the company’s turnover ratio is far better than the average industry, 50 days inventory turnover ratio. f) Trade payables’ (creditors’) turnover period. The payables turnover ratio during both years is similarly pegged at 3 days. Comparing the 2013 return on equity output with the industry payables turnover ratio, the industry average’s 20 days payables turnover ratio is favourably better than the company’s 3 days payable turnover ratio. A longer payment date is better than a shorter payment date. Further, table 2 shows how the purchase amounts were generated from the company’s financial reports for years 2011, 2012, and 2013. By working back to find the missing purchase figure from the three given amounts, the purchase figure for each year is easily generated. The 2013 purchase amount, which is used in the computation of the above trade payables turnover period, is £836,815,000. The Other (Wahlen et al., 2010) g) Gearing ratio. The gearing ratio for 2013 is only 3 percent. On the other hand, the gearing ratio for 2012 is financially better at 4 percent. The best gearing formula or ratio is 100 percent. Comparing the company’s 2013 gearing formula with the average industry gearing ratio, the average industry gearing formula output, 4 percent, is financially better than the company’s 2013 period’s 3 percent output. h) Price earnings ratio. The 2012 accounting period’s price earnings ratio is 8 times. The 2013 accounting period’s price earnings ratio is favourably higher, 9 times. Comparing the 2013 price earnings ratio with the industry’ average price earnings formula ratio, the average industry 9 times price earnings ratio is unfavourably higher than the company’s price earnings r ratio. Question 4 Table 3 (Greencore, 2013) a) Revenues. There is a percentage revenues change rise of 3 percent from the 2012 accounting period to the 2013 accounting period, (1,197,099-1,161,930)1,161,930. In terms of 2012 accounting period, there was a favourable 44 percentage rise from the prior year’s revenues (Wahlen et al., 2010). b) Operating Profit. There is a percentage operating profit change increase of 101 percent, (71,739-35,623)/35,623, from the 2012 accounting period to the 2013 accounting period. In terms of the same 2012 accounting period, there was an unfavourable lower 79 percentage change from the prior year’s operating profit (Wahlen et al., 2010). c) Share Price. There is a percentage operating profit change increase of 77 percent, (145-5-82.13)/82.13, from the 2012 accounting period to the 2013 accounting period. In terms of the same 2012 accounting period, there was an unfavourable lower 29 percentage change from the prior year’s share price figure (Wahlen et al., 2010). Question 5 (Greencore, 2013) Pertaining to question 3 (Wahlen et al., 2010) Profitability Return on equity. In terms of return on the owner’s investments, the return on equity formula shows that the company favourably performed better during 2013 than 2012. Gross profit margin. In terms of generating higher gross profit, the gross profit ratio formula shows that the company performed on the same financial level for both 2013 and 2012. Net profit margin. In terms of generating higher net profit, the net profit ratio formula shows that the company performed favourably better during 2013 than during the prior 2012 annual period. Liquidity: Current ratio. The current ratio formula shows that the company performed favourably better during 2013 than 2012. Asset Management Inventory (stock) turnover period. It takes unfavourably longer to convert purchased inventory into cash during the 2012 accounting period than the 2013 accounting period. Trade payables’(creditors’) turnover period. In terms of payment of trade payables, the payables’ turnover formula shows that the company performed similarly better during 2012 accounting period and 2013 accounting period. It took longer to pay the 2012 payables than the 2013 payables. Other Gearing ratio. In terms of the relationship between total liabilities and shareholders’ equity, the gearing formula shows that the company performed favourably better during 2012 accounting period and the 2013 accounting period. Price earnings ratio. In terms of the relationship between the stock market price and the EPS, the company’s price earnings formula shows that the company performed favourably better during the 2012 accounting period than 2013 accounting period. Pertaining to question 4 (Wahlen et al., 2010) d) Revenues. The above table 3 shows the 2013 revenues is £ 1,197,099,000. The amount is favourably higher (rise) than the prior 2012 annual period’s amount. The 2012 revenues amount is only £ 1,161,930,000. The prior 2011 year’s revenues output is unfavourably lower than the 2012 revenues output at only £804,210,000. Comparing the two years, the 2012 accounting period generated a favourably higher (rise) percentage change than 2013 accounting period. e) Operating Profit. The same table 3 shows the 2013 operating profit is £ 71,739,000. The amount is favourably higher (rise) than the prior 2012 annual period’s amount. The 2012 operating profit amount is only £ 35,623,000. The prior 2011 year’s operating profit is unfavourably lower than the 2012 output at only £ 19,851,000. Comparing the two years, the 2013 accounting period generated a favourably higher (rise) percentage change than the prior 2012 accounting period. f) Share Price. The same table 3 shows the 2013 share price is £ 145.5 per share. The amount is favourably higher (rise) than the prior 2012 annual period’s share price amount. The 2012 share price is only £ 82.13 per share. The prior 2011 year’s share price is unfavourably lower than the 2012 share price at only £ 63.65 per share. Comparing the two years, the 2013 accounting period generated a favourably higher (rise) percentage change than 2012 accounting period (Greencore, 2013). Question 6 Table 4 (Greencore, 2013) The Dupont analysis (Table 5) affirms that some assets significantly influence the Dupont’s return on equity performance for the current year (Wahlen et al., 2010). The company’s net profit influences the Dupont outcome. The 2013 net income is £71,730,000. The 2012 net income is £ 35,623,000. Compared to the 2012 net income, the favourably higher 2013 net income led to the higher 2013 Dupont ROE over the 2012 Dupont ROE. Further, other amounts influence the Dupont Analysis. The revenues or revenue influences the Dupont analysis. The 2013 revenues is £ 1,197,099,000. The 2012 revenues is £ 1,161,930, 000. Compared to the 2012 revenues, the favourably higher 2013 revenue led to the higher 2013 Dupont ROE over the 2012 Dupont ROE (Wahlen et al., 2010). Next, the total assets amount affects the Dupont output. The 2013 total assets amount is £ 1,010,860,000. The 2012 total assets amount is £ 1,018,938, 000. Compared to the 2012 total assets amount, the unfavourably lower 2013 total assets reduced the difference between the 2013 and 2012 Dupont ROEs (Wahlen et al., 2010). Lastly, the shareholders’ equity amount may trigger a rise or fall in the Dupont output. The 2013 shareholders’ equity figure is £ 252,047. The 2012 shareholders’ equity figure is £ 200,519, 000. Compared to the 2012 shareholders’ equity, the favourably higher 2013 figure led to the higher 2013 Dupont ROE over the 2012 Dupont ROE (Wahlen et al., 2010). Combining the above four inputs, the Dupont Analysis indicates the 2013 Dupont return on equity is 28 percent. On the other hand, the 2012 Dupont ROE is unfavourably lower, 18 percent. The 2013 Dupont Analysis output is favourably higher (better) than the 2012 Dupont Analysis output (Wahlen et al., 2010). References: Greencore, 2013. Investors. Ireland: Greencore. Available from: www.Greencore.com. [Accessed December22, 2014]. Greencore, 2013. Market Price. Ireland:Greencore. Available from: https://uk.finance.yahoo.com/q/hp?s=GNC.L&a=08&b=25&c=2012&d=08&e=2 8&f=2013&g=d&z=66&y=198 Wahlen et. al., 2010. Financial Reporting, Financial Statement Analysis and Valuation, London: Cengage Learning. Appendix Table 1 Financial Statement Ratios (£ thousands) Ratio Expression 2013 2012 2013 result 2012 Result Industry Average ROE NI/S Equity 71,739/252,047 35,632/200,519 28% 18% 19% Gross profit margin Gross Profit/Net Revenues 358,954/1,197,099 349,735/1,161,930 30% 30% 10% Net profit margin Net profit/Net Revenues 71,739/1,197,099 35,623/1,161,930 6% 3% 3% Current ratio Current Assets/Current Liabilities 176,140/384,805 180,446/334,443 .47 .37 1.70 Inventory turnover period Cost of revenues/average inventory 838,145/111,380 812,195/79,474 7.53 days 10 days 50 days Payables’ turnover period Total Purchases/Average Payables 836,815/293,148 814,759/ 268,100 3 days 3 days 20 days Gearing ratio Total Liabilities/Shareholders’ Equity 758,813/252,047 818,419/200,519 3 % 4% 4% P/E ratio Net Profit/EPS 145.50/18 82.13/9 8 x 9x 9.0 x Table 2 Computation of Purchase Amounts              £ thousands 2013 2012     invty beg 54,474 51,910     add: purchases 836,815 814,759     less: invty end 53,144 54,474     cost of revenues 838,145 812,195             Table 3 Other Comparisons                           Percent Percent       2013 2012 2011 Change 2013 Change 2012     Revenues 1,197,099 1,161,930 804,210 0.03 0.44     Operating profit 71,739 35,623 19,851 1.01 0.79     Share price 145.5 82.13 63.65 0.77 0.29                   Table 4 Dupont Table £ Thousands 2013 2012 Net Income (a) 71,730 35,623 Shareholders Equity (b) 252,047 200,519 Duponts Return on Equity (a/b) 0.28 0.18 Table 5 Dupont Formula: Dupont ROE = Net Income Revenues Total Assets Revenues x Total Assets x Shareholders Equity Read More