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Finance and Asset Management Report - Essay Example

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Finance and Asset Management Report

2012, 2011 and 2011. This performance evaluation has been conducted by using ratio analysis which has been the most effective performance evaluation tool in terms of past performance trends. The comparison of the financial performance of Great Portland is also made in collaboration with one of the industry competitor named as Songbird over the same financial periods. Following are the five broader areas of ratio analysis namely profitability, liquidity, efficiency, solvency and investment under which the performance evaluation has been conducted (Brigham et al, 2008). Profitability Analysis The profitability picture of Great Portland provides a better view if the past performance is taken into consideration. It can be observed that the net profit margin of Portland has improved massively as it just started some momentum in the year 2010 (Great Portland Estates, 2012). However, in the year 2011, the firm bounced back on significant note and continued its better performance in the year 2012 as well. Very similar trend can also be observed if operating profit margin is taken into consideration, which started peaking in the year 2010. However, operating profit margin for Great Portland has been on an increasing trend. If these two ratios of Great Portland are compared with Songbird, it can be noted that Songbird was performing well on these notes until 2012 when it drowned into losses (Songbird Estates plc, 2011). However, operating profit margin is still positive for Songbird in the last year but it has declined severely in the last three years. If return generated by the assets of the firm, are taken into consideration, Great Portland has improved its performance in this area as well such that from 13% ROA, it has increased to the ROA of 17% which is a very delightful sign for the company until 2012 when it declined to 7.9%. Likewise, return on shareholders’ equity has also performed well as it has increased from negative 17%% to positive 23%, which is a tremendous indicator that the equity of the company is making good profits until 2012 when it reduced down to 12%. Conversely, these two ratios for Songbird have again showed sluggish performance over the past three years as their performance in terms of both ROA and ROE has shifted into negative zone, which is an alarming sine for Songbird. Ratios 2012 2012 2011 2011 2010 2010 Great Portland Songbird Great Portland Songbird Great Portland Songbird Profitability Net Profit Margin 339.61% -33.47% 407.68% 146.40% 349.89% 63.57% Operating Profit Margin 378.56% 82.53% 432.13% 93.36% 404.92% 116.46% Return on Assets 7.90% -1.37% 17.05% 6.86% 13.17% 3.28% Return on Equity 12.53% -5.09% 23.38% 24.00% 17.84% 16.99% Liquidity Analysis The liquidity analysis of both the companies is conducted rather in a brief manner as only one ratio has been selected for this purpose, which is current ratio. Current ratio mainly depicts the amount of current assets available in order to pay off $1 current liability of the company (Watson, 2009). If the current ratio of Great Portland is taken into consideration, it can be noted that this figure has been observed consistently on a declining trend such that the current ratio of the company was 2.59, which depicts that the company had only ?2.59 in order to pay o ...Show more

Summary

Great Portland Estates BRIEF DESCRIPTION OF COMPANY Great Portland Estates is the entity established in UK, which acts under the investment property sector of UK. The company operates as Real Estate Investment Trust (REIT). The company itself has decided to undertake its operations as REIT so that it can avoid federal income taxes subject to the condition that it has to pay more than 90% of its income to its equity holders (Great Portland Estates, 2012)…
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Finance and Asset Management Report essay example
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