Marks and Spenser Financial Information Management

Document Type:Thesis

Subject Area:Finance

Document 1

For that reason, Tesco Plc is the most suitable retailer in the United Kingdom to compare and analyse against Marks & Spenser. This paper seeks to examine the Financial Statements of Marks & Spenser and Tesco Plc for the last five years. The paper will then discuss the significant trends and results of the two companies and later compare and contrast Marks & Spenser’s financial performance versus that of Tesco Plc including a significant evaluation of the corporate governance arrangements of Marks & Spenser versus that of Tesco Plc. The report makes a comparison of qualitative and quantitative data among M&S and Tesco plc during the period of 2013-2017 and further makes an assessment of the financial positions of the two companies; profit growth as well as other performance measures by making use of different ratio calculations to advice investors who wish to invest future.

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Profitability Ratios ROCE (Return on Capital Employed) Within the past three years, the ROCE of M&S reduced from 15. 196)which included the cost of redundancy as well as dilapidation. Additionally, M&S sustained several expenses of £51. 2m for the purposes of insurance mis-selling stipulation. Contrary to the non-underlying, the authentic profit of M&S was 7. 6m) off the entire income. M&S seems to be steadily raising hardships in profit generation with the money that have been invested by shareholders in the enterprise (Tordo et al. The optimistic transformation in the equity that was influenced by redemption of capital, retained earnings and buyback of shares further have an essential effect on this particular ratio (Naser et al. Through making observations of the ROE of the two retail companies, Tesco seems to have suffered a dispossessed return on equity of -79.

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14% in 2014 nevertheless, a quite surprising enhancement to 1. 50 in the year 2017. GPM (Gross Profit Margin) The GPM of M&S has increased for the past three years with regards to the calculations presented. The net profit has always had a continuous progress thus leading to the amount that was arrived at the net profit. There is also a gross margin of £39. 65 that was received in every £100 that was made in the years 2013, 2014, 2015, 2016 and 2017. The leading factor at this juncture is the increasing revenue that was recorded every year. 97 ROCE* (%) 15. 80 Return on equity (%) 18. 66 Ratios for Liquidity Current Ratio The current ratio for M&S has augmented by 0. 24% for the period between 2013 and 2017. The increase was influenced by the noteworthy negative difference between the present assets and preset liabilities.

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After subtracting the inventory from the current assets, it offers a figure of M&S that is more accurate that responds to demands for payment from banks and creditors. Consequently, with 0. 36 that was indicated on the quick ratio for 2017, it can therefore be accepted provided that so much of the present assets have rapidly selling stock products which were matched by increased trade creditor levels. Nevertheless, M&M’s quick ratio is significantly low when compared to its competitors particularly Tesco which recorded increased values which are typical for retailers. Tab. The intangible assets and PPE, even though they reduced, still have a great contribution towards the turnover for assets. Through this perception, it is found that M&S effectively utilized its operating assets (DeZoort 93).

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The ratio for asset turnover indicates that for every £1 of employed capital, M&S made a return of £1. 66, and resumed £0. 66 of its earnings. Nevertheless, the revenue for M&S has been changing thus indicating effective customer credit management collection (Thompson and Carolan 234). Tesco deemed reduction on the collection period from 8 recorded in 2014 to 4 days in 2016 and which was the same as that of M&S even though sales were reduced by 14%. Trade payable Payment Period The M&S period for payment has steadily increased since it took longer in the year 2015. Nevertheless, the balance for accounts payables has been reducing. The cost for sales has also a very insignificant effect here since it was better managed in 2015 and reduced by 1. The Net debts also referred to as the debts-cash has reduced whereas equity has increased mostly because of buyback of shares.

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This gives a reflection of the ability of M&S to meet most of its debts by using its capital. Even though the reduction in the gearing ratio as well as the performance aspects had an effect on the ROCE to the reduction along the entire period of three years, M&S is still seen as company that is profitable and is better placed for ordinary shareholders. Tesco, its competitor, indicated a gearing ratio that was high during the entire period of three years which is a risky venture for shareholders, despite being quicker and higher in profitability. Debts to Capital Employed This ratio indicates that the risk level at M&S has been reducing, with reduced percentages as the employed capital is used.

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4: Solvency Ratios for Marks & Spenser (2013 - 2017) and Tesco (2013) Marks & Spenser 2013 2014 2015 2016 2017 2013 Tesco Plc 2013 Debts to Equity Ratio 48,03 47,15 47,84 45,91 44,35 41,10 41,48 Debts to Capital Employed 40. 94 Interest Cover 15. 80 Investors Ratio Earnings per Share The EPS for M&S in 2013, 2014, 2015, 2016 and 2017 respectively reduced significantly. As initially illustrated, the profit had been influenced by administrative and selling costs. M&S gave less ordinary shares in 2017 as compared with the past four years because of a reduction in profit. M&S aims at a core strategy of sustainable development in EPS because of a consistent cash flow, thus making investments in business by using 363. 3m on stores that are new and also continue with the buyback programme. Earning Yield The earning yield for M&S in the five years was 6.

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14% and 6. The result indicated that M&S had the best Earning Yield in 2017 which reflects that the company could reinvest its earnings instead of making payments of dividends to shareholders in case it decided to do so. Despite all the interruptions, M&S was still able to conduct a strong business and generated profit from diverse sources and also made investments in ways which were appropriate. These investments can be found in the asset turnover even though the ratio has slightly reduced. M&S is cautious on the control of cost as well as healthy creation of cash. For Tesco, it might take some time to return to the stock market and be perceived as an attraction by investors. Therefore, shareholders should decide on which company they wish to invest.

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