Essay on Financial Ratio Analysis on Morrison Supermarket PLC.

3632 Words Nov 17th, 2013 15 Pages
Financial Ratio Analysis on Morrison Supermarket PLC: Assignment 1

Contents Page

1.0 Introduction …………………………………………………………………………….2

2.0 Calculations and Analysis of Findings with Recommendations………………………………………………………. ………….………...2-6

3.0 Discussion ………………………………………………………………………………6

4.0 Conclusion ……...………………………………………………………………………7

Appendices……………………………………………………………………………….8-11

Reference List ……………………………………………………………………………12-13

1.0 Introduction
The financial report aims to provide potential investors, lenders, shareholders (or directors on their behalf) and management an objective insight into the performance and profitability of Morrison during the period
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Therefore, it is important that Morrison’s managers avoid tying up these funds by improving their judgement on the level of inventories to carry. For instance, if a manager can anticipate an increase in inflation, they will know prices will tend to rise and so sales will ultimately fall; this can potentially lead to increases in inventory held.
The ASTP ratio measures the number of days a firm takes to pay-off any short-term obligations (Atrill and McLaney, 2011). The results show a substantial fall in meeting-short term obligations between 2009 and 2010, and a steady fall onwards. As a result, more suppliers may be willing to trade with Morrison in the future, and make available more finance for the firm to invest in other areas of the business. However, Morrison must be careful not take their suppliers goodwill for granted (Baker and Powell, 2005), instead the company’s managers must look to reduce the number of days in order to maintain a strong relationship with suppliers.
The SRCE ratio assesses how well a firm utilises their long-term capital (total assets and non-current liabilities) to generate sales revenue (Atrill and McLaney, 2011). After a fall in 2010, Morrison has maintained a consistent sales revenue to capital employed level up until 2012. In comparison with Tesco, Morrison has a higher value; which suggests that the firm is using

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