Company Analysis: Wm Morrison Supermarkets Plc - Coursework Example

In addition to these, Morrison is also involved in managing local authority and associate body’s capital spending programmes such as kitchen and bathroom replacement. Auditor’s report: To Auditor’s report are given by a group of auditors who are independent and possess authority to examine the company’s assets and earnings in which ever manner possible. Auditors report presents an opinion about the financial statements encompassing statement of comprehensive income, cash flows, change in equity and notes to financial statement by following the standardized procedures put forward in Companies Act 2006 as well as International Standards on Auditing (UK and Ireland).

They would certify that the financial statements are made in accordance with the standards and regulation or not. This report is an important statement for investors looking to put private equity in the business. An investor conceives this report as a way to increase credibility of the figures presented. The investors can be a shareholder, lender, prospective investor or the employees of the company. This report will provide the building block of faith needed to pursue the transaction. Financial Ratios: Ratio Expression 2011 2010 2011 result 2010 Result Industry Average Eg Trade receivables period1 39 days 26 days - ROE 12.08% 10.17% 19% Gross profit margin 6.89% 6.28% 10% Net profit margin 3.88% 3.16% 3% Current ratio 0.5 0.52 1.

70 Inventory turnover period 14.67days 13.24days 50 days Payables’ turnover period 34.34 38.41 20 days Gearing ratio 77% 82% 4% P/E ratio 1190.8 1156 Percentage Change in the following: a) Sales b) Operating Profit c) Share Price 2011 2010 % inc/dec. Sales 15410 14528 6.7% Operating Profit 808 686 17.7% Share price 297.7 266.1 11.9% Ratio Analysis Profitability: The company has performed well over the last year with soaring profits in comparison to year 2010. The company reported an increase in the Gross profit as well as the net profit margin.

The gross profit margin increased to 6.89% in 2011 in comparison to 6.28% in 2010. Moreover, the net profit margin boosted from 3.16% in 2010 to 3.88% in 2011. ROE increased to 12.88% in 2011 to give satisfaction to the shareholders. Liquidity: In terms of liquidity, the company has fallen below the level prevalent in 2010. The current ratio has dropped to 0.5 in 2011 as compared to 0.52 in 2010. The liabilities maturity within one year has increased higher in proportion to the liquid asset owned by the company.

This has created a mismatch which eventually resulted in plummeting ratios. Asset Management: Asset Management has mixed reviews. A businessman’s prime goal in to reduce the time it takes to get a cash inflow and increase the time of outflows. The company has done that successfully over the last two years. The Inventory turnover period has been impressive in relation to the industry. However, in 2011 the days to hold inventory increased to 14.67days from 13.2 days in 2010. The company leads to industry in terms of this ratio.

This shows highly efficient management of the resources on hand and excess inventory management system. On the other hand, the suppliers have had a hard time with Morrison. The payable turnover in days has decreased from38.41 days in 2010 to 34.34 days in 2011. This is a sign of contentment for a supplier as the credit period has decreased. The company should take care of the suppliers and work efficiently to reduce the gap. Others: The company weighs highly on debt therefore; it is