Financial Analysis - Case Study Example

Financial Analysis Name Institution Instructor Course Date of Submission Introduction JD Wetherspoon is a fully fledged company that is currently engaged in providing management services and development to various and diversified public houses. The company owns several pubs and outlets that are spread in most parts of the U.K. currently, the company operates about 665 pubs and 92 non smoking described pubs. Its performance has rocketed because it provides non alcoholic and alcoholic drinks in form or breakfasts in its pubs. The company operates business in the development and beverage sector, and has been doing the business for decades (Hargreaves 2014). Description of the company Global markets have been expanding with lots of diversities among its operations. Financial analysis for several companies reveals an indepth understanding of efforts that employees and management of the company have driven into the business in order to remain relevant and strategically positioned to serve a great deal of clients (Hargreaves 2014).. The financial analysis is considered as a tool that provides an insight into the strengths and strategies that are used by the company to conduct businesses. It also reveals the connection that exists between business operations, structures, key competitors, and executive based biographies. Several companies have been using the financial analysis interpretations to assess their position in the market, and relate strengths, weakness, threats and opportunities that may cause serious challenges to the businesses. Once the sales and position of the businesses is determined, the conclusions generated can therefore be used to adopt strategic approaches to enhance sustainability and strategic performance among its employees, and stakeholders. Consistency and reliability is only achieved when the financial flows from sales remains consistent and relevant with the outlined procedures and as directed by objectives of the company (Hargreaves 2014). Quick Analysis Market share and Index based interpretations The data presented is most current, such that, the peak share was ranging between 860 and 855 while the minimum was ranging at about 825. This indicates that the company has been making greater benefits and generating sustainable profits with regard to the current market definitions and interpretations (Hargreaves 2014). Current shares Bid: 832.00 Offer: 833.50 Volume: 492,270.0 Prev close: 852.00 Shares issued: 124.979347 52 week high: 882.00 Index: Last Change with regard to market volatility of 05-07 16:35 and strategically positioned Open: 844.50 High: 848.00 Low: 825.00 Security type: Equity 52 week low: 594.00 Market Cap: 1,070.44 The Pricing theory outlines that markets are so volatile such that, market shares and indexes for companies keeps on varying, and changing depending with different changes that occur within the market and how companies and business firms are competing to ensure that their share stands out as the best for the day or for hours. It has an open share of about 844, while its lowest stands at about 825 (Hargreaves 2014). The gaps that exists within the market is not so fatal to existence of the business because the market share index stand at about 832 of the total market share from all businesses operating within the volatile market. A change of -2.35% existed for the whole market, while the change in financial streaming was estimated at -20.00. This means that the market was not favorable, an there have been fluctuations between the trading and stock exchanges between several companies operating in the same sector as Wetherspoon (JD) PLC. Today’s Trading and market share Date Time traded Buying/Selling Amount paid Pricing Value calculated 07/05/14 04:35pm Sell 20551 832.00 170984.32 07/05/14 04:29pm Sell 61 832.50 507.83 07/05/14 04:29pm Sell 74 832.50 616.05 07/05/14 04:29pm Sell 239 832.50 1989.68 07/05/14 04:29pm Sell 130 832.50 1082.25 07/05/14 04:29pm Sell 84 833.00 699.72 07/05/14 04:29pm Sell 94 833.50 783.49 07/05/14 04:29pm Sell 111 833.50 925.19 07/05/14 04:29pm Sell 27 833.50 225.05 07/05/14 04:29pm Sell 35 833.50 291.73 07/05/14 04:29pm Sell 128 834.00 1067.52 07/05/14 04:29pm Sell 402 834.00 3352.68 07/05/14 04:29pm Sell 4 834.00 33.36 07/05/14 04:29pm Sell 55 833.00 458.15 07/05/14 04:29pm Sell 112 834.50 934.64 (Hargreaves 2014). The average at which a company stock move in relation to the motion or movement of returns with reference to the economic index is referred to as beta (Hargreaves 2014). It is documented that when the tow variables moves in lockstep, the beta is assumed to be 1.0. Beta depends on two identifiable factors in such away depends on relative volatilities of the returns on stocks, and prevailing index of the returns. When beta is 1, it the business is ideal because the returns are the same as the volatilities. However, the beta of 1 can also have returns of more than 10 volatilities. When the beta value is positive, it means that returns on stock and index are falling simultaneously or rising at the same time (Hargreaves 2014). Reasons why the values are different The values are different because of the difference in length of time at which the data has been considered. The beta data presented is 0.75 while the calculated data is 0.79. This means that the differences have resulted from different formulas that have been used to determine the values (Hargreaves 2014). Different analysis companies can also have different answers and values when using the same length of time, and therefore, for the companies to have the same values, they should use same formulas and they should consider the same length of time. For example, three years considerations will give a different answer compared to when five years are considered. The frequency at which the price values are considered also varies with companies such that some of the analysis considers weekly data while others prefer analyzing daily price share data. In some scenarios, the close data on Monday is different from when the data is considered at the close of Wednesday. This case should go in hand with viable considerations of different volatility indexes that prevail in the market. A good example is where by some companies compare their data by using FSTE 200 while others consider FSTE 250. All these variations exist in the market, and therefore, a unique value and index should be considered and factored to ensure that the variabilities are within the closed frameworks. The information presented on different sites should be analyzed strategically to evaluate and know the formulas that have been used in order to compare the data effectively and sustainably. The following data reveals the share data performance for the last five years. Income Statement: 28th -07-2013 29th /07/2012 24th/07/2011 25th /07/2010 26/07/2009   (Millions rated) (Millions rated) (Millions rated) (Millions rated) (Millions) The Revenue: 1,280.930 1,197.130 1,072.010 996.330 955.12 Estimated Operating Profit / (Loss): 91.510 93.84 96.920 89.460 75.08 Specified Net Interest: (34.370) (34.95) (35.530) (29.000) (30.85) Estimated Profit Before Tax: 57.140 58.880 61.390 60.460 45.03 Outlined Profit after taxing and from continuing operations: 46.190 44.570 46.790 40.780 25.30 Analysis Discontinued Operations:  Elaborated Profit after tax and from discontinuing documented operations: Not applicable Not applicable Not applicable Not applicable n/a The Profit outlined for the period: 46.190 44.570 46.790 40.780 25.30 Analyzed Profit Attributable to:  The Equity holders with regard to parent company: 46.190 44.570 46.790 40.780 25.30 Estimated Minority Interests and Other Equity: Not applicable Not applicable Not applicable Not applicable n/a Analyzed Total Dividend Paid and cleared: c 12.000 c 12.000 c 12.000 c not applicable c n/a The Retained Profit or (Loss) for the outlined for Financial Year: c not applicable c not applicable c not applicable c not applicable c n/a Outlined Earnings per Share:  The Basic: 38.300p 35.600p 35.400p 30.200p 18.20p Estimated Diluted: 36.600p 34.300p 35.400p 30.200p 18.20p Approximated Adjusted: 46.800p 41.300p 35.300p 36.000p 32.60p Outlined Dividend per Share: 12.000p 12.000p 12.000p Not applicable n/a Balance Sheet: 28th -07-2013 2nd -07-/2012 24th -07-2011 25th -07-2010 and 26/07/2009   (in Millions rated ) (Millions rated) (Millions rated) (Millions rated) (Millions) Estimated Assets:  Estimated Non-Current Assets:  Specified Property, Equipment & Plant: 956.930 924.340 881.270 810.7100 773.90 Outlined Intangible Assets: 20.170 16.940 11.53 6.7 4.86 Documented Investment Properties: Not applicable Not applicable Not applicable Not applicable n/a Strategic Investments: Not applicable Not applicable Not applicable Not applicable n/a Estimated Other Financial Assets: Not applicable Not applicable Not applicable Not applicable n/a Specified Other Non-Current company Assets: 21.430 26.880 26.091 27.600 18.74   998.520 968.160 918.890 845.010 797.50 Established Current Assets:  Outlined Inventories: 19.860 20.980 21.490 19.910 17.95 Calculated Trade with Other Receivables: 23.940 18.680 21.620 19.730 16.33 Estimated Cash at Bank and estimated In Hand: 29.840 28.040 27.690 26.081 23.60 Estimated Current Asset Investments: Not applicable Not applicable Not applicable Not applicable n/a Calculated Other Current Assets: 0.420 2.060 0.070 Not applicable 1.13   74.060 69.760 70.870 65.720 59.02 Specified Other Assets: Not applicable Not applicable Not applicable Not applicable n/a Company’s Total Assets: 1,072.580 1,037.910 989.760 910.730 856.52 Documented Liabilities:  Outlined Current Liabilities:  Specified Borrowings: 5.550 5.880 3.130 2.830 102.81 Specified Other calculated Current Liabilities: 217.26o 216.220 199.230 174.050 155.68   222.810 222.100 202.360 176.880 258.49 Specified Net Current Assets: c not applicable c not applicable c not applicable c not applicable c n/a Analysis of Non-Current Liabilities:  Significant Borrowings: 498.500 484.770 462.2500 411.6400 310.34 Estimated Provisions: 61.130 67.860 71.450 75.580 77.63 Other elaborated Non-Current Liabilities: 75.220 93.540 82.650 84.480 42.36   634.850 646.170 616.350 571.710 430.33 Associated Other Liabilities: Not applicable Not applicable Not applicable Not applicable n/a Calculated Total Liabilities: 857.660 868.270 818.710 748.590 688.82 Company’s Net Assets: 214.910 169.640 171.040 162.140 167.69 Analysis of Capital & reserves:  Concerned Share Capital: 2.520 2.520 2.630 2.780 2.78 The associated Share Premium Account: 143.290 143.290 143.200 142.980 142.46 Company’s Other Reserves: (33.330) (48.930) (41.610) (43.170) (24.64) The Retained Earnings: 102.430 72.760 66.830 59.560 47.10 Company’s Shareholders Funds: 214.910 169.640 171.040 162.140 167.69 The Minority Interests and Other Equity: Not applicable Not applicable Not applicable Not applicable n/a Estimated Total Equity: 214.910 169.640 171.040 162.140 167.69 . A has been used to reveal that there is discontinued of activities, and b has been utilized to show presence of assets that have been due present in a period of one year. Whereas c has been used to indicate all aspects and financial considerations that have not been disclosed under the IFRS structure, d has been include in the analysis to represent number of total fixed assets, and finally, e represents borrowings (Hargreaves 2014). The company has been generating a positively correlated network of revenues and the trend indicates that the revenue collections by the company have been increasing on annual basis (Hargreaves 2014). However the operating profit for the company has had challenges because the operating profits were 96.92 million British Pounds in 2011 and they reduced to 93.84 million British Pounds in 2012, before they reduced further in 2013 to reach 91.51 million British Pounds. The same scenario occurred with reference to net interests and extended to present the same challenges with the profit after the taxation process. The continuing operations profits slightly reduced from 46.79 million British Pounds, to 44.57 million British Pounds in 2012, and after one year, the profits increased to 46.19 million British Pounds even though they were slightly below the profits that were generated from continuity operations of 2011 (Hargreaves 2014). However comparing the profits from continuing operations in 2009 and 2010 reveal that there was strategic repositioning of the company in the market, possibly after effects of recession. There was an increase in these profits from 25.30 to 46.79 million British Pounds. This indicates that the company has experienced several challenges of marketing or selling their products and offering excellent services to their targeted clients between 2010 and 2011, and the current positive change is due to the strategic polices that have been implemented by the management team and stakeholders of the company (Hargreaves 2014). Dividends per share per holder have been kept constant by the company and the benefits reaped are high. However, the basic and diluted earning for each share has been rocketing and generating good and sustainable interests for all share holders. Internal operational practices for the company are sustainable, good, and effective because the benefits based on interests are high, and the trend is positive (Hargreaves 2014). In this regard, the profits retained for the year are not applicable, because the operation and financial considerations of the company does not factor in the element of including them in the statements. Plant, property, and equipment of the company have been recording a great value, and increased valued assets because their number have increased from 924.34 in 2012 to 956. 93 in 2013. There is a positive trend and flow of ideas with considerations that the management has investing great funds to buy equipments, plants and property. The borrowing are challenging to a company especially whey it lacks proper mechanisms through which they can repay. The borrowing was high in 2012 and they reduced significantly in 2013. Looking keenly at the net assets owned by the company reveals that the company has been investing much on establishing an increased availability of the assets, and the objective has been achieved. However there was a significant drop in number of assets whereby in 2012, the net assets averaged at 169.64 while the same net asses was estimated in 2012 at 171.04. The same figures therefore outline the significant recording s for total equity of the company (Hargreaves 2014). This means that the company has been targeting to have a balance between the net assets and the total equity. Comparing the performance with the four months period reveals that the company is laying mechanisms to have a unique presence in the financial markets, and if this trend is maintained, there will be a positive trend and promising beta which will also be consistent returns on stocks favored by the current share price performances index in the market. The company is more relevant, and the current positive changes and costs on pricings are consistent with benefits that companies obtain when they outsource their raw materials locally and internationally (Hargreaves 2014). The modern based portfolio theory outlines that amount of equity and debt that makes up the definition of a company’s or organization capital structure poses many risk to the organizations and therefore organizations should diversify their operations and assets in order to generate great benefits. Behavioral finances are critical when risks are not evaluated and when significant changes within the capital structure is not considered. All challenges and risks posed on capital structures should be considered and their effects should be kept within the minimum frameworks in order to safe guard the business for future operations and practices in markets that consists of more volatilities with regard to stocks, and revenue generations as described by the internal performance of the company (Hargreaves 2014). References Hargreaves, L. 2014, JD Wetherspoon plc (JDW) ordinary 2p. Viewed 7 May 2014. Read More