Accounting report
Exam Number:
Word Count: 1485
CRANFIELD SCHOOL OF MANAGEMENT
Executive MBA Programme 2011/2012
Term: 1
Part: 1
ACC
WAC
Sodexo Vs Compass
This assessment/report is all my own work and conforms to the University’s regulations on plagiarism
An identical copy of this document has been submitted to the Turnitin system
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY
The analysis of the financial ratios of Sodexo and its peer Compass has revealed important deviations that must be considered by the board.
Despite the increase in revenues announced for 2010, Sodexo maintained a lower operating profit margin than that of Compass. Thus, indicating an inefficient cost management and a weak pricing strategy adopted by Sodexo. Liquidity appears to be a challenging issue for Sodexo and Compass. Both companies, clearly, are undergoing a competition of growth through acquisition of subsidiaries which had a negative impact on the liquidity in both companies. Nevertheless, Sodexo’s long trade receivables settlement period has even worsen the company’s liquidity.
Seeking a better image vis-à-vis its rival Compass, Sodexo has increased its dividends pay out on the account of its liquidity, thus, relying on borrowing rather than operating activities. This is explained by the high financial gearing ratio that has not been translated to an increase in the company’s profitability, a short sighted strategy that should be reconsidered by the board.
Recommendations:
1. Focus on maximising profit from operations,
2. Revaluate the entire trade receivables strategy that appears to be performing inefficiently,
3. Maintain a correlation between the amount dividends pay out and the operating profit margin.
2. INTRODUCTION
This report compares Sodexo’s performance to that of its peer Compass based on the financial ratios, profitability, efficiency, liquidity, financial gearing and investment. In addition to that, it
Word Count: 1485
CRANFIELD SCHOOL OF MANAGEMENT
Executive MBA Programme 2011/2012
Term: 1
Part: 1
ACC
WAC
Sodexo Vs Compass
This assessment/report is all my own work and conforms to the University’s regulations on plagiarism
An identical copy of this document has been submitted to the Turnitin system
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY
The analysis of the financial ratios of Sodexo and its peer Compass has revealed important deviations that must be considered by the board.
Despite the increase in revenues announced for 2010, Sodexo maintained a lower operating profit margin than that of Compass. Thus, indicating an inefficient cost management and a weak pricing strategy adopted by Sodexo. Liquidity appears to be a challenging issue for Sodexo and Compass. Both companies, clearly, are undergoing a competition of growth through acquisition of subsidiaries which had a negative impact on the liquidity in both companies. Nevertheless, Sodexo’s long trade receivables settlement period has even worsen the company’s liquidity.
Seeking a better image vis-à-vis its rival Compass, Sodexo has increased its dividends pay out on the account of its liquidity, thus, relying on borrowing rather than operating activities. This is explained by the high financial gearing ratio that has not been translated to an increase in the company’s profitability, a short sighted strategy that should be reconsidered by the board.
Recommendations:
1. Focus on maximising profit from operations,
2. Revaluate the entire trade receivables strategy that appears to be performing inefficiently,
3. Maintain a correlation between the amount dividends pay out and the operating profit margin.
2. INTRODUCTION
This report compares Sodexo’s performance to that of its peer Compass based on the financial ratios, profitability, efficiency, liquidity, financial gearing and investment. In addition to that, it
References: BIBLIOGRAPHY 1) McLaney, Artill, 2010, Accounting an Introduction, Fifth Edition, Financial Times Ltd,