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