Somerfield plc Company's performance and financial position.

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COVENTRY UNIVERSITY

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 牋牋牋牋3

II- PERFORMANCE 牋牋牋牋4

RETURN ON CAPITAL EMPLOYED (ROCE) 牋牋牋牋4

RETURN ON SALES (ROS) AND ASSET TURNOVER 牋牋牋牋5

GROSS PROFIT MARGIN (GPM) 牋牋牋牋6

STOCK HOLDING PERIOD 牋牋牋牋7

DEBTORS DAY 牋牋牋牋8

CONCLUSION 牋牋牋牋9

III- FINANCIAL POSITION 牋牋牋牋10

CURRENT AND LIQUID (ACID TEST) RATIOS 牋牋牋牋10

GEARING RATIO 牋牋牋牋11

INTEREST COVER RATIO 牋牋牋牋12

CONCLUSION 牋牋牋牋13

IV- CASH FLOW 牋牋牋牋14

THE IMPORTANCE OF CASH MANAGEMENT 牋牋牋牋14

SOMERFIELD PLC'S CASH FLOW 牋牋牋牋14

V- REFERENCES 牋牋牋牋16

VI- APPENDIX 牋牋牋牋17

I- Introduction

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).

II- Performance

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...