Report on Analysis of Next Plc
Next pc is a uk based retailer that sells moderately price clothing for men, women and children. It also specialize in housewives and furnitures through 500 stores primarily in uk and irelandl. It also franchise more than 200 stores in asia nad Europe counties.
The primary financial indicator is the roce which has shown an increases to 53.4 % in 2012 from 52.09 %. But, if the capital employed included the new £300m committed bank facility that yet drawn down at the financial reporting, then the roce show a fall to 42.07 %. The group might understate their long term liabilities.
Roce could further be analyzed through two main ratios which are operating margin and asset turnover.
It is seen that there …show more content…
The company’s current ratio have improved to 1.54:1 in 2012 from 1.28 : 1 in 2011 as well as quick ratio have increased to 1.30 :1 in 2012 from 0.84 in 2011 ; despite the global recession. However, behind the ratio is the increase in current assets ( 3.45 %) while decrease in current liabilities (10.87 %). Both ratios are affected by the drop drastically of their bank loan and overdraft from 125m to 7.6m. Of course, as refer to last part, the committed bank facility should be ensure since the 300m should be consider as material toward the company.
Another specific factor of concern is inventory turnover . This ratio was decreased to 57 days from 58 days in 2011. It indicated that they have improved their management on inventories despite it just only a small decreases.
The trade receivable turnover had increase to 63 days in 2012 from 59 days in 2011. However, this ratio may not prove to be strong point of consideration as most of its sales are on cash basis. In addition, the credit sales figure is not available in the company’s financial report hence we just using the total sales for calculating this ratio that may not accurately represented.
The derivation of meaningful payables turnover period is quite difficult as not all the operating expenses are incurred on normal credit terms. (i.e. wages and salaries – cash based ; depreciation and amortization charges – non cash items). So, trade payables cannot be directly