Bily Analysis of Marks and Spencers annual report (Example)

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1. Explain the term “stakeholder” and the types of stakeholders in Marks and Spencer Stakeholders A stakeholder is an individual or an organization with a personal interest in the day to day live off a business entity through a one on one relationship e.g. through investment as the employee of the firm or as an owner of the respective business. They contribute to the value and well-being of the organization and are affected by any event the firm undergoes e.g. inflation profit and loss-making technological change just to mention but a few. Stakeholders are the subset of shareholders who are the individuals or organization that own the part of the total stockpile of the business and are legally recognized as a shareholder of the business only when they have been registered and have been the added officially to the company’s list of shareholders. Other stakeholders include; customers suppliers of would give cause for concern. According to the ratios the company is not performing well as there is no increase in profits and also the number of sales decreased as shown in the stock turnover ratio. d) Critically evaluate the application of financial ratios in interpreting and measuring the performance of a company. Ratios can be used in cross-sectional analysis to compare the performance of the company with the performance of the competitors. Ratios indicate the ability of the firm to meet its short term financial obligations when they are due. They indicate the efficiency in which the firm utilizes the assets at its disposal to generate profits. Ratios indicate the extent to which the firm has used externally borrowed fixed interest capital to finance its assets Ratios can be used in trend analysis to compare the performance of a company in a given year with previous financial years. [...]

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You have recently attended a workshop aimed at improving your understanding of company Annual Reports using Marks and Spencer’s report as an example. During the workshop you looked at the following sections of Marks and Spencer’s annual report:  The Strategic Report which included a focus on ‘Creating Sustainable Value’,  The Directors Report which focuses on Governance, Accountability and Remuneration,  The Consolidated Financial Statements of: ‘Income’ (also sometimes referred to as the Statement of Profit and Loss) ‘Financial Position’ and ‘Cash-Flows’. You learned about how different ‘stakeholders’ may use the information contained in these reports and financial statements. You also learned about financial ratios and how these can be used to interpret and assess the performance of a business in terms of its profitability, liquidity, efficiency and return to investors. The timing of the workshop was very fortuitous. You are the Purchasing Manager for the business you work for. You are in the process of letting a contract for the supply of an important component used in your business’s production. You have been provided with the financial statements of Dorman Co. who are a strong contender in the contract letting process. The income statement and statement of financial position have been reproduced below. As well as reviewing the financial statements of Dorman Co. from a potential customer perspective, you are interested in how the company may be viewed by potential investors, lenders and suppliers. You have also collected the following information about other companies operating in the same sector as Dorman Co.: Current ratio 1.5 Quick ratio 1.0 Trade receivable days 60 days Inventory days 55 days Trade payable days 85 days