River island in Ipswich in the UK - Essay Example

River Island in Ipswich in the UK River Island in Ipswich in the UK For each available year, CALCULATE the Company’s: Gross profit margin = Gross profit /revenue =180,362,050/670538155 2006 = 0.27 2007 = 155,053,275/652,257,262 = 0.23 2008 = 165,588,865/677,359,466 = 0.24 2009 = 168785159/735570248 = 0.23 2010 =156152209/720328095 = 0.21 2011 =131.1/720.7 (Million) = 0.018 2012 = 139.3/739.7 = 0.18 Operating profit margin = Operating Income/Net sales 2006 =153645793/108534827 = 1.

42 2007 = 131765867/95096280 = 1.38 2008 =132012406/110057792 = 1.19 2009 = 130341526/119735976 = 1.08 2010 = 113885312/110793773 = 1.02 2011 = 84.7/74.5 = 1.13 2012 =95.6/78.8 = 1.21 Net profit margin = Net profit/ Revenue 2006 =108534827/670538155 = 0.16 2007 =95096280/652257262 = 0.14 2008 =110057792/677359466 = 1.16 2009 =119735976/735570248 = 0.16 2010 = 94544873/720328095 = 0.01 2011 = 74.5/720.7 = 0.1 2012 = 78.8/739.7 = 0.1 Cash conversion cycle measures the amount time it takes for the company to transform its resource inputs into cash flow.

It is an attempt to measure the length of time each net income is tied up in the production and sales before it can be converted to cash through sales. 2006 CCC = DIO +DSO – DPO DIO= (490176105-433075251)/2 =37582854/1342948.2 = 28 days DSO = average AR/Revenue per day = 3408312/1837090.8 =1.8 days DPO = Avarage AP/Revenue per day =0.2 days CCC =(DIO +DSO)-DPO =(28 +1.8) -0.2 2006 = 29.6 days 2007 = DIO = 23208606.5/1362202 = 17 days DSO = average AR/Revenue per day =1948968.5/1787006 = 1 day DPO = Avarage AP/Revenue per day = 385132.

5/1787006 = 0.2 days 2007 CCC =(17 +1) -0.2 = -17.8 days 2008 CCC = DIO = 12551102/1402111 = 8.9 days DSO = average AR/Revenue per day = -393917/1855779.3 = -0.2 days DPO = Avarage AP/Revenue per day = -553841/1855779.3 = -0.3 days 2008 CCC =(8.9 +-0.2) –0.3 = 9 days DIO = 735570248/1552761.9 =473.7 days DSO = average AR/Revenue per day =2645844/ (735570248/365) =2645844/2015260.9 = 1.31 days DPO = Avarage AP/Revenue per day =1692193/2015260.9 = 0.8 days 2009 CCC = (473.7 +1.31) -0.8 = 474.

9 Days 2010 CCC = DIO = -15242153/1545687.3 = -9.8 days DSO = average AR/Revenue per day =673272.5/1973501.6 =0.34 days DPO = Avarage AP/Revenue per day = 2330366/1973501.6 =1.2 days 2010 CCC = (-9.8+0.3) – 1.3 = - 10.8 days 2011 CCC DIO = 200000/1615342.5 = 0.1 Days DSO = 750000/1974520.5 = 0.3 days DPO =7500000/1974520.5 = 3.8 days 2011 CCC = (0.1+0.3) – 3.8 = -3.4 days 2. DESCRIBE and EXPLAIN the Company’s financial performance over this period. According to the consolidated Profit and Loss account at the end of 2006, the turnover was 670,538,155 which was an increase of £75,165,708 from the 2005 turnover.

The general performance of the company was better compared to the previous year as reflected by the gross profit and the operating profit. Gross profit grew by £18,064,854 while net profit for the 2006 financial year was £6,228,997 from the previous financial year. The company’s financial performance in 2007 was negative despite a higher turnover of £652257262 which was a significant increase of £46,417,213 from the previous year. The Cost of good sold went up by £ 56,218,923. Affected the net operating profit which dipped by £1,710,525.

Despite the rise in the cost of goods sold, the performance for the 2008 fiscal year rose. The turnover was 677,359,466. This was £25,102,204 higher compared to the previous financial year. The cost of goods rose by £14,566,614 but this did not affect the profits as the company recorded a net operating profit of £110057792. From the loss received the previous year, the profit for the 2008 saw an increase of £14961512. There was a momentous rise of £58,210,782 in the company’s turnover in the 2009 financial period (RIVER ISLAND, 2009 p7).

Nevertheless, the rise in the cost of goods sold and the distribution and administration expenses led to a dip in the profits. For instance, the administration expenses rose from 33,576,459 to 38,443,633 (a difference of 4,867,174) Furthermore, the interest receivable was noticeably low compared to the previous year while interest payable rose exponentially from £731, 1003 to 2,423,196. Therefore, the company paid £1,622,193 more on interest and other charges. Still, the company managed a raise in its profits after taxation from 110,057,792 the previous year to £119,735,976 in 2009.

The turnover for the 2010 (RIVER ISLAND, 2010 p9) fiscal year was £720,328,095. This was a significant depression of £15,242,153. The implication was that the overall profit after taxation would reduce. Despite the reduction in the cost of goods sold. Distribution and administration expenses increased from £38,443,633 the previous year to 42,266,897 (a difference of £3,823,264) this affected the operating profit which plunged to £113,885,312 from £130,564,174 the previous financial year.

The profit after taxation was reduced further by the higher taxation and increased charges on interest payables. As a result, the profit after taxation was £ 94,544,873 this was a loss of £25,191,103. The 2011 financial year saw a slight increase on the overall turnover of the company. However, the cost of production rose. Similarly, distribution and administration expenses and interest payable grew considerably. These affected the profits negatively resulting to a loss of £20.1 million. In the 2012 financial year, the turnover rose to £739.

7 from £720.1 (million). However, the cost of sales continued to rise to £600.4 from £589.6 million (RIVER ISLAND, 2012 p8). Though the distribution and administration expenses reduced, improving the operating profit, interest payable and other charges increased from £8.6 million in 2011 to £8.8 million in 2012. As a result, the company performed better in 2012 compared to 2011. The overall performance of the company across the six years show a downward trend with higher gross profit margin of 0.

27 in 2006 to .018 in 2012. The cost of production, administration and distribution expenses and the interest payables grew exponentially across the six financial periods while the turnover reduced. This could be blamed to the external factors such as the economic crisis that begin in the late 2007 and peeked in 2008/2009. For instance sales in the clothing and textile sector of the economy fell due to the credit crunch due to the collapse in the consumer confidence, loss of employment. There was a 2.

1% reduction in garment sales in the year 2008. Manufacturers and exporters also suffered. The volume of exports in the US fell both in value (10%) and volume (5%) and continued throughout the fiscal years. 3. In the 52 weeks to 29 December 2012, River Island Clothing Co Ltd paid over £70 million in rent on its shops. a) CALCULATE the Business Rates payable for 2013-14 on the River Island shop that has been allocated to you. River Island Clothing Co. Ltd. i. 15a, TOWER RAMPARTS CENTRE, TAVERN STREET, IPSWICH, IP1 3BB (RIVER ISLAND WEBSITE, page1) a) The business rate = multiplier × ratable value = 29,250× n = 29,250n (this is because there is no value from the website indicating the multiplier). b) SUBMIT a copy of the relevant page from the Valuation Office Agency website with details of your shop’s rateable value.

Source: Valuation Office Agency (http://www.2010.voa.gov.uk/rli/en/basic/find/valuation/2010/10720484000/8795776000/H) c) STATE one interesting fact about the town, city or suburb in which your shop is located. Ipswich is the oldest permanently inhabited town in the country with evidence of settlement dating far as 625 AD. It was the first town to be built by the Anglo-Saxons when they conquered Britain and was originally called Gypeswic. It was known for its large scale potteries that begun with the Fresian potters.

These helped establish the town as a trading town References RIVER ISLAND. Annual Reports. Retrieved April 19, 2014, from http://www.riverisland.com/ RIVER ISLAND. Store Locater. Retrieved April 19, 2014, from http://www.riverisland.com/how-can-we-help/store-locator/Search?Query=Ipswich&Women=false&Men=false&Kids=false&ChelseaGirl=false&Superstore=false&HollowayRoad=false&AccessBoutique=false VALUATION OFFICE AGENCY. My valuation. Retrieved April 19, 2014, from http://www.2010.voa.gov.uk/rli/en/basic/find/valuation/2010/10720484000/8795776000/H