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Commentaries on a company's performance over last 2 years - Assignment Example

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Commentaries on a company's performance over last 2 years

This means that the company’s inventory has been higher than the sales in the year 2012-13. This is not favorable position since inventory piling up indicates that money is tied up in inventory. Then, receivable days have been calculated, and this has reduced in 2012-13 from the previous year. This means that the company is in good position in respect to its debtors since lower receivable days indicates that the company takes less time to collect the receivable amounts. By faster receive of due, collection related problems get reduced, and also the company has improved its profitability and rate of return on investment by better management of funds receivable. Finally, payable days have been calculated which has increased in 2012-13 from the previous year. This means compared to previous year, Morrison has been delaying payment to creditors to conserve cash. This can happen because Morrison has good terms with vendors. Compared to the previous year, Morrison has been holding on to its cash for a longer period in 2012-13. In this section, horizontal analysis is done by measuring the amounts receivable and payable in the two concerned financial years. Amount receivable has reduced in 2012-13 which means that Morrison has shown a better performance in collecting debts this year. This means increased cash which can be used for operational purposes. On the other hand, amount payable has increased in 2012-13. As already explained Morrison may have been holding on to cash and delaying payments for operational purposes. In this section, profitability ratios have been calculated to determine the operating success of Morrison. There has been an increase in the gross profit margin from 1.76% in financial year 2011-2012 to 1.86% in 2012-13. This indicates that the company is enjoying an improvement in its market position, and is in a position to charge higher price for its products which in turn can result in enhanced revenues. However, there has been a 7 percent decline in EBIT (earnings before interest & tax) in 2012-13 from previous year. The major reason attributed is difficult conditions in the market. According to chief executive Dalton Philips “economic backdrop remains difficult for the consumer” (BBC, 2013). There has been also a 6 percent decline in net sales in 2012-13 from previous year, and this can be contributed to Morrison’s lack of online shopping facilities and lesser number of convenience stores as compared to its rivals like Tesco, Asda and Sainbury’s (BBC, 2013). Next, current ratio has been calculated which means a company’s ability to pay its dues and also to garner cash during emergencies. Morrison has a very low current ratio 0.57, and it has been stable in the two concerned financial years. Current ratio lower than 1 usually means the company is at risk and can have liquidity problems in the near future. However, for retail giants like Morrison, current ratio lower than 1 can be acceptable. This is because being a retail company, Morrison can negotiate long periods of credit with suppliers, but can deny large credit to customers. Moreover, Morrison has its own supply chain which means the company can keep track of food supply and can appropriately meet daily needs of consumers resulting in minimum waste (Annual report 2013, p.3). This reduces the cost of inventory pile up. Next, inventory days, receivable days and payable days have been calcul ...Show more

Summary

Morrison Supermarket PLC: Performance in 2011-12 and 2012-13 Morrison Supermarkets A Morrison supermarket PLC is the fourth largest retailer in U.K. with annual turnover more than ?18 bn. This paper analyses its performance in the financial years 2011-12 and 2012-13…
Author : diamonddickens
Commentaries on a companys performance over last 2 years essay example
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