Financial Statement Analysis

(2004-2008) Course Title: Managing Financial Resources Course: MSc. Finance Date: 11th January 2010. TABLE OF CONTENT Executive Summary This report shows the analysis of the financial performance of Centrica Plc, one of the top energy business providers in UK. Based on my analysis from this report I can conclusively state that: Centrica Plc has an upper hand in the energy and gas market than it s competitor; Scottish Power. Centrica Plc’s turnover was very high in 2008 which shows that it made better sales than its competitor. Although Centrica’s sales turnover was high in 2008 but the profit margin dropped drastically. In the overall financial performance Centrica Plc made a loss of £645million in 2008 compared to the previous year 2007 when the company had a retained profit of £1088million. This was considered to be an impact of the global financial crises that hit the UK and US economy causing increase in oil prices and a drastic fall again as the level of global oil demand rises and at the same time causing a tight supply position. Centrica Plc’s Total shareholders return has an upper hand when compared with other 99 members of the FTSE 100 in 2008. INTRODUCTION evaluate the impact of financial accounting concepts on corporate reporting of Centrica Plc. evaluate the limitations of ratio analysis discuss the role of management accounting in the evaluation of Centrica’s business performance. I have been motivated to choose Centrica Plc because of the type of product they deal in, which is energy. It is a product that is essential for all, not just households. And it will be good to know if this company is actually doing well in terms of profitability and customer’s satisfaction. LITERATURE REVIEW *PROFITABILITY RATIO ANALYSIS *OF CENTRICA PLC AND SCOTTISH POWER (Reference: FAME (Financial Analysis Made Easy) FINANCIAL RATIO

References: Asmii Vernekar, 2009. Available at: http://www.buzzle.com/articles/basic-accounting –concepts-and –principles.html. Assessed on 15th December, 2009 Buz/ed, 2009. Available at: http://www.bized.co.uk/compfact/ratios/sdc5.htm Assessed on 13th December, 2009. Centrica Plc, 2005. International Financial Reporting Standards. Available at: http://www.centrica.co.uk/files/results/2004_ifrs_transcript.pdf. Assessed on 15th December, 2009 FAME (Financial Analysis Made Easy), 2009. Available at: http://www.fame.bvdep.com/version-20091130. Assessed on 11th December, 2009 Peter Atrill, and Eddie McLaney (2008), Accounting and Finance for Non-Specialists, 6th ed. Prentice Hall, financial times. David Alexander and Christopher Nobes. (2007), Financial Accounting, An International Introduction, 3rd ed. Prentice Hall, financial times.