Financial Ratio Analysis on Morrison Supermarket PLC. Essay Example

Financial Ratio Analysis on Morrison Supermarket PLC: Assignment 1

Contents Page

1.0 Introduction …………………………………………………………………………….2

2.0 Calculations and Analysis of Findings with Recommendations………………………………………………………. ………….………...2-6

3.0 Discussion ………………………………………………………………………………6

4.0 Conclusion ……...………………………………………………………………………7

Appendices……………………………………………………………………………….8-11

Reference List ……………………………………………………………………………12-13

1.0 Introduction
The financial report aims to provide potential investors, lenders, shareholders (or directors on their behalf) and management an objective insight into the performance and profitability of Morrison during the period 2009-2012, and (when appropriate) benchmarked with Tesco. Financial ratios are required to obtain a comprehensive and objective view of Morrison that satisfies the requirements of all stakeholders mentioned. The reasons for why financial ratios are continually used and relied upon, are simply a consequence of their efficiency in assessing the financial health of a business (Atrill and McLaney, 2011), and because they are an appropriate way of measuring and managing the success of a firm (Bull, 2008). The need for accounting information varies depending on stakeholders’ interests and levels of involvement within the firm (Atrill and McLaney, 2011). Nonetheless, financial ratios alone cannot explain why certain strengths and weaknesses are present; they must be used as a starting-point for an investigation (Atrill and McLaney, 2008). Refer to table 1 in appendices for selected ratios.

2.0 Calculations, and Analysis of Findings with Recommendations
2.1 Profitability Ratios for Morrison 2009-2012, and Tesco 2012
Morrison Supermarkets PLC
2009
2010
2011
2012
Tesco PLC 2012
Gross Profit Margin (GPM) %
6.3
6.9
7
6.9
8.2
Operating Profit Margin (OPM) %
4.6
5.9
5.5
5.5
6.2
Return On Capital Employed (ROCE) %
15.1