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A Report on the Profitability of Stock Investment in Ted Baker PLC - Term Paper Example

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This paper assesses the profitability of Ted Baker PLC’s stock by performing in-depth financial analysis. Profitability, gearing, and liquidity is assessed. The key findings are as follows: the company’s profitability, the stock price is in an upward trend…
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A Report on the Profitability of Stock Investment in Ted Baker PLC
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Download file to see previous pages Ted Baker PLC is primarily involved in the design, manufacture, wholesale and retail of menswear, womenswear, and childrenswear and related accessories which includes skin wear, fragrances, eyewear, and watches. The company was formed by Ted Baker and J. Peterman and is a leader in the apparel and textile industry in the United Kingdom. Ted Baker PLC has 100 retail distributors in the United Kingdom. Internationally, the company’s product line is sold in 600 other stores abroad (Ted Baker PLC 2006).
Historical Performance       
 Looking at the historical performance of the company is essential in determining trends in the profitability of the company. The historical performance will be assessed using the major accounts of Ted Baker PLC and the corresponding financial ratio analysis.
           Financial ratio analysis is a very essential tool in assessing the financial health of a business entity. Specifically, it enables a financial analyst to spot trends in business and to compare it with the performance of similar business enterprises within the same industry. Financial ratios are grouped into three categories, each showing a different aspect of a company’s financial operations. These are profitability, financial leverage or gearing, and liquidity/solvency ratios.
Profitability
          Profitability ratios measure the ability of the company to generate income from its investments less the costs incurred. Ted Baker’s ability to efficiently manage its accounts and generate revenue and profit for the company can be assessed by looking at the trend in the turnover and profit. Profitability is not only denoted by the expansion in the numerical value of revenue and profit but by looking at the growth rate of these accounts.
            Figure 1 shows the growth rate of Ted Baker’s revenue and profit from the five-year period 2001-2002. It can be seen that the growth in profit follows the expansion of turnover. It is noticeable that in the past two years, the recorded profit of Ted Baker grows at a faster and more steady rate than revenue implying more efficient cost management. ...Download file to see next pagesRead More
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