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Financial Comparison of Burberry and French Connection - Research Paper Example
Pages 8 (2008 words)
They say that accounting is the language of business(Meigs, 1995). Well this is definitely held true when the balance sheet, income statement and the statement of cash flows are used in financial statement analysis with the aid of ratios(Larson, 1995). The following paragraphs compares the financial statement ratios of the French Connection and Burberry companies.
This shows that the company can easily pay all its debts in case of liquidation due bankruptcy or other reasons. Current assets include cash and cash equivalents, accounts receivable and notes receivables, inventory end, office supplies (bond paper, folder and others), furniture and fixtures, office equipment (computers, calculators, adding machines and the like) and many others.
When the total debt of Burberry amounting to 286 is divided by its equity to the tune of 387, the result is seventy -four percent. This shows that the company does have a good leverage ratio. The leverage ratio is a must analytical tool when borrowing huge sums of money from banks and other credit institutions.
Based on the above analysis, Burberry has a better debt to equity ratio because its debt to equity ratio is seventy -four percent. On the other hand, French Connection has a bad leverage ratio because its debt to equity lower at only forty eight percent. The best debt
When the net income of Burberry is divided by its revenues amounting to 106 is divided by its net sales or revenues of 743, the result is fourteen percent. This shows that the company should increase its net profit ratio by either increasing its revenues or decreasing its costs and or expenses.
Based on the above analysis, Burberry has t ...