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"Assess the financial performance of William Hill over the last 4 years and discuss how management accounting can assist a service providing business like William Hill"
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o assess the financial performance of William Hills is its profitability assessment over the last four years and the satisfaction of investors in terms of returns on their investments. The tool of ratio analysis is used for assessing such financial performances of William Hills. In order to assess the profitability the ratios that are considered for the four year performance are operating margin, net margin, return on total assets (ROA), and return on common equity (ROE).
Let us start with operating profits. “Operating profit margin measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes, and preferred stock dividend are deducted. It represents the pure profits earned on each sales dollar. Operating profits are pure because they measure the profits earned on operations and ignore interest, taxes, and preferred stock dividends.”(Lawrence J Gitman, page 67)i The assessment of operating margin ratios of William Hills suggests that profitability performance is sliding down since 2006. The operating profit margin was 32.68% in 2006, 30.7% in 2007, 28.91% in 2008, and then down to 25.31% in 2009. One of the reasons for this sliding performance is poor response to newly introduced online gambling business. In fact “the online business of William Hills has tarnished the group’s reputation for management excellence by mismanaging the online sports book technology project.”(Betting Market, Viewed on 19th May 2009)ii
The analysis of profitability on basis of net profit margin is also very interesting because “the net profit margin is indicative of management’s ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or services, the expense of operating the business (including depreciation) and the cost of borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratio
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dy 24 Further Analysis 24 Summary and Conclusions 25 Major Findings 25 Conclusion 25 References 27 WILLIAM HILL WORKING CAPITAL MANAGEMENT IN ACQUISITION OF STANLEY LEISURE BY WILLIAM HILL WAS THE WILLIAM HILL ACQUISITION OF STANLEY LEISURE WORTHWHILE? Abstract According to ‘Financial Times,’ William Hill (largest betting bookmaker in the UK) is set to purchase a diverse empire of Stanley Leisure (largest casino operator in the UK).
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