SCHOOL OF ENGINEERING
Postgraduate Engineering Programs
Financial Statement Analysis
Report on Somerfield plc's performance
and financial position
MODULE LEADER: Mr. GRAHAM SARA
STUDENT'S NAME: AMIN SAADAIE
Session date: 2004/05
TABLE OF CONTENTS
I- INTRODUCTION Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ3
II- PERFORMANCE Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ4
RETURN ON CAPITAL EMPLOYED (ROCE) Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ4
RETURN ON SALES (ROS) AND ASSET TURNOVER Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ5
GROSS PROFIT MARGIN (GPM) Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ6
STOCK HOLDING PERIOD Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ7
DEBTORS DAY Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ8
III- FINANCIAL POSITION Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ10
CURRENT AND LIQUID (ACID TEST) RATIOS Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ10
GEARING RATIO Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ11
INTEREST COVER RATIO Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ12
IV- CASH FLOW Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ14
THE IMPORTANCE OF CASH MANAGEMENT Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ14
SOMERFIELD PLC'S CASH FLOW Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ14
V- REFERENCES Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ16
VI- APPENDIX Ã§ÂÂÃ§ÂÂÃ§ÂÂÃ§ÂÂ17
The purpose of this report is to analyse the Somerfield plc Company's performance and financial position. In chapter II, the company's performance is evaluated by profitability and efficiency ratios and some conclusion are drawn. In chapter III, by relying on liquidity and gearing ratios, the financial position of the company is discussed.
Finally, the importance of cash management is described and the cash situation of the company is analysed in chapter IV.
The two competitors in the same industry, which were the J Sainsbury plc and Tesco plc, were chosen for assessing the ratios. The outcomes of calculating same ratios for these companies were compared with a set of four-year trend in Somerfield plc Company's ratios.
In order to evaluate the ratios, all of them are benchmark against Time, Industry competitors and Expectations (TIE method).
Return On Capital Employed (ROCE)
ROCE is one of the most important ratios for measuring performance of companies. The ratio expresses the relationship between the company's profit and total capital which is invested in the company. Therefore, the more ROCE shows that more profit has been generated by certain amount of...