Posted: April 17th, 2015

Economics and finance

Economics and finance

Order Description

You are presented with the Income Statement and the Statement of Financial Position for the retailer WM Morrison for 5 years, 2010 to 2014. You have been asked by a potential investor to provide information which will help them to decide whether or not to invest in the business.
In particular they have asked you to calculate a selection of accounting ratios for each of the 5 years. These are to be presented as an appendix to your essay in appropriate tables. The required ratios are the Gross Profit ratio; the Mark up ratio; the Net Profit ratio; the Return on Capital Employed for total capital; the Pre-tax ROE; the Post-tax ROE; the Interest Cover; Gearing (both measures); and the Stock Turnover.
Required:
(a) Calculate the required ratios and present in a clearly labelled appendix.
(25 Marks)
(b) Write an essay in which you explain the performance ratios calculated. Your essay should refer to the reliability, or otherwise, of using such analysis. This will require reference to appropriate texts which should be referenced in appropriate Harvard style. You should also explain that other interested stakeholders might be interested in other aspects of the business. (700 Words excluding References)
(50 Marks)
(c) You receive another request from the potential investor. This time he wants you to write a brief account of the liquidity of the business. Furthermore, the investor ratios provided in the accounts need explaining. The investor is particularly interested in the performance of the business compared to its competitors. (350 Words excluding references)
(25 Marks)
The following websites provide information on some of Morrison’s rivals in the?retail market to help you make comments on the performance of Morrison in a?more vigorous manner:

http://www.j-sainsbury.co.uk/investor-centre/reports/2014/annual-report-and-financial-statements-2014/
http://www.tescoplc.com/files/pdf/reports/ar14/download_annual_report.pdf
http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-report.pdf

Morrison WM Supermarkets

Income Statement and Statement of Financial Position

2010 to 2014

Income Statement For The Year Ending:
02/02/2014
03/02/2013
29/01/2012
30/01/2011
31/01/2010

(Millions)
(Millions)
(Millions)
(Millions)
(Millions)
Revenue (Sales):
17,680.00
18,116.00
17,663.00
16,479.00
15,410.00
Gross Profit
1,074.00
1,206.00
1,217.00
1,148.00
1,062.00
Operating Profit / (Loss):
-95
949
973
904
907
Net Interest:
-82
-70
-26
-30
-49
Profit Before Tax:
-176
879
947
874
858
Profit after tax from continuing operations:
-238
647
690
632
598
Discontinued Operations:

Profit for the period:
-238
647
690
632
598
Attributable to:

Equity holders of parent company:
-238
647
690
632
598
Total Dividend Paid:
c 13.00
c 11.80
c 10.70
c 9.60
c 8.20
Retained Profit / (Loss) for the Financial Year:
c n/a
c n/a
c n/a
c n/a
c n/a
Earnings per Share:

Basic:
-10.23p
26.65p
26.68p
23.93p
22.80p
Dividend per Share:
13.00p
11.80p
10.70p
9.60p
8.20p

Balance Sheet As At:
02/02/2014
03/02/2013
29/01/2012
30/01/2011
31/01/2010

(Millions)
(Millions)
(Millions)
(Millions)
(Millions)
Assets:

Non-Current Assets:

Property, Plant & Equipment:
8,625.00
8,616.00
7,943.00
7,557.00
7,439.00
Intangible Assets:
458
415
303
184
n/a
Investment Properties:
119
123
259
229
229
Investments:
97
31
31
n/a
n/a
Other Financial Assets:
n/a
n/a
1
3
n/a
Other Non-Current Assets:
n/a
n/a
n/a
38
n/a
Total Non-Current Assets
9,299.00
9,185.00
8,537.00
8,011.00
7,668.00
Current Assets:

Inventories:
852
781
759
638
577
Trade and Other Receivables:
316
291
320
268
n/a
Cash at Bank & In Hand:
261
265
241
228
245
Other Current Assets:
1
5
2
4
270
Total Current Assets
1,430.00
1,342.00
1,322.00
1,138.00
1,092.00
Other Assets:
n/a
n/a
n/a
n/a
n/a
Total Assets:
10,729.00
10,527.00
9,859.00
9,149.00
8,760.00
Liabilities:

Current Liabilities:

Borrowings:
553
52
115
n/a
213
Other Current Liabilities:
2,320.00
2,282.00
2,188.00
2,086.00
1,939.00
Total Current Liabilities
2,873.00
2,334.00
2,303.00
2,086.00
2,152.00
Net Current Assets:
c n/a
c n/a
c n/a
c n/a
c n/a
Non-Current Liabilities:

Borrowings:
2,480.00
2,380.00
1,600.00
1,052.00
1,027.00
Provisions:
637
547
548
591
615
Other Non-Current Liabilities:
47
36
11
n/a
17
Total Non-Current Liabilities
3,164.00
2,963.00
2,159.00
1,643.00
1,659.00
Total Liabilities:
6,037.00
5,297.00
4,462.00
3,729.00
3,811.00
Net Assets:
4,692.00
5,230.00
5,397.00
5,420.00
4,949.00
Capital & reserves:

Share Capital:
234
235
253
266
265
Share Premium Account:
127
107
107
107
92
Other Reserves:
2,617.00
2,615.00
2,597.00
2,584.00
2,584.00
Retained Earnings:
1,714.00
2,273.00
2,440.00
2,463.00
2,008.00
Total Equity: (Shareholders Funds:)
4,692.00
5,230.00
5,397.00
5,420.00
4,949.00

a. Includes discontinued activities

b. Including assets due in more than one year

c. Not disclosed under IFRS

d. Total fixed assets

e. Includes borrowings