Financial Analysis

5406 words 22 pages
UNIVERSITY OF PORTSMOUTH | Report for Primark’s IPO purposes | Financial Analysis Assignment | | Student ID: 635281, 636484, 640073 | 11/28/2011 |

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Table of Contents I. Introduction 4 II. Primark’s business and financial situation 5 2.1. Primark’s business and financial analysis 5 2.1.1. Business analysis 5 2.1.2. Financial situation (trend analysis) 6 2.2. Industry sector 11 2.2.1. Overview 11 2.2.2. Cross-sectional analysis 12 2.2.3. Summary of Primark’s strength and weakness 16 III. Financial ranking and forecast 17 3.1. Financial ranking 17 3.2. Forecasted 2011 post tax profit 18 IV. Corporate Governance Structure 20
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In the end of financial year 2010, revenue and profit were £1986m and £203m respectively.

Figure 1: Primark's Revenue & Adjusted operating profit

(Created from data obtained from Hemscott)
However, in order to having an insight Primark’s Financial Situation, the financial ratios analysis was necessary. Financial ratios describe the relationship between different accounting numbers in the financial statements. The information provided by ratios can be used to interpret what has happened and to predict what will happen [ (Mc Laney & Atrill, 2005) ].
The information provided by ratios can be used to interpret what has happened and to predict what will happen (Mc Laney & Atrill, 2005). Generally, financial ratios are grouped into categories: profitability, solvency, liquidity, efficiency and investment. a. Profitability
Figure 2: Primark's Profitability Ratios

(Created from data obtained from Bloomberg)
The return on capital employed (ROCE) ratio expresses the efficiency of company at generating operating profit from its long-term capital (Collins & McKeith, 2010). Although decreasing gradually in first four years, it was witnessed a significant increase by more than 35% in 2010. Over the last five, the ratio is always higher than 45%, hence it is clear that Primark was not bad at managing its cost and resources, especially in 2010.
In this period, the gross profit margin fluctuated insignificantly between 17.5% and

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