An Analysis of Uchumi Supermarkets’ Financial Ratios
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Financial Ratios are relative magnitudes of select numeric items of a company’s financial statements. The assessment of the operating performance of a company is based on five main types of ratios. These are liquidity, gearing or solvency, activity, profitability and investor ratios. Profitability ratios include margins and return on investments or resources. In addition to the financial statements or annual reports, the analysis uses information from management notes, auditor reports, and pertinent macro-level or industrial-level analysis and legislation or policies. An understanding of the financial health of a company draws from a combination of the ratios (not assessed in isolation) and the qualitative information available.
Uchumi Supermarkets
Uchumi, Kenya’s only publicly listed retail chain, was incorporated in 1975 with the main objective of facilitating in the equitable distribution of essential and locally produced commodities at affordable prices in the country. In a quest to meet this objective, in the early 2000s the company undertook an ambitious countrywide and regional expansion. During the same period it began to experience financial and operational difficulties. This was later associated with its decision on the expansion method and weak internal controls. As a result, the company was put under receivership in 2006, suspended from the Nairobi Stock Exchange (NSE) and work started to restore it. Five years later, the company has been removed from receivership (in 2010) and relisted on the NSE (in 2011) with the
Financial Ratios are relative magnitudes of select numeric items of a company’s financial statements. The assessment of the operating performance of a company is based on five main types of ratios. These are liquidity, gearing or solvency, activity, profitability and investor ratios. Profitability ratios include margins and return on investments or resources. In addition to the financial statements or annual reports, the analysis uses information from management notes, auditor reports, and pertinent macro-level or industrial-level analysis and legislation or policies. An understanding of the financial health of a company draws from a combination of the ratios (not assessed in isolation) and the qualitative information available.
Uchumi Supermarkets
Uchumi, Kenya’s only publicly listed retail chain, was incorporated in 1975 with the main objective of facilitating in the equitable distribution of essential and locally produced commodities at affordable prices in the country. In a quest to meet this objective, in the early 2000s the company undertook an ambitious countrywide and regional expansion. During the same period it began to experience financial and operational difficulties. This was later associated with its decision on the expansion method and weak internal controls. As a result, the company was put under receivership in 2006, suspended from the Nairobi Stock Exchange (NSE) and work started to restore it. Five years later, the company has been removed from receivership (in 2010) and relisted on the NSE (in 2011) with the
References: Pamela Peterson Drake (2007). Financial Ratios, Reading Material, Principles of Financial Management, Department of Finance and Business Law, James Madison University, Web, Retrieved 2012-02-17, from http://educ.jmu.edu/~drakepp/principles/module2/fin_rat.pdf John R. Mills and Jeanne H. Yamamura (2009). The Power of cash Flow Ratios, Department of Accounting and CIS, University of Nevada, Reno, Web, Retrieved 2012-12-17, from http://www.rbcpa.com/The_Power_Of_Cash_Flow_Ratios.html Uchumi Supermarkets, Website - 2012, Retrieved 2012-02-17 from http://www.uchumi.com/index.php?option=com_content&task=view&id=9&Itemid=10 Findoutinfo.com, Financial Ratios, Retrieved 2012-02-17 from http://www.findoutinfo.com/direct/CD001?stylesheet=USE315.xsl Atrill McLaney (2011), Accounting and Finance for Non-specialists, Seventh Edition, Prentice Hall,