Income Statement and Statement of Financial Position for Assessment :
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.
(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)
(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)
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:
https://www.j-sainsbury.co.uk/investor-centre/reports/2014/annual-report-and-financial-statements-2014/