Financial Analysis 1

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Nov 18, 2013 (3 years and 9 months ago)

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Financial Analysis
1


Running head: FINANCIAL ANALYSIS












Financial Analysis

[Name of student]

[Name of institute]



Financial Analysis
2


Financial Analysis

Ted Baker

Ted Baker is a designer brand engaged in the design, wholesale and retail of its collection
including menswear,
womenswear, global, formal, endurance, born; accessories; lingerie and
sleepwear; childrenswear; fragrance and skin wear; footwear; neckwear;

eyewear and
watches.

Ted Baker Plc

operates through the following three main distribution channels that are retail
,
wholesale and licensing. Ted Baker Plc operates retail stores and concessions across the UK,
Europe, the U.S. and Hong Kong and an on
-
line business based in the United Kingdom and a
separate site dedicated to the Americas.
Ted Baker Plc

operates a wholes
ale business in the UK
serving 15 countries across Europe and a wholesale business in the
United States
.


Context

This paper focuses on the financial status of Ted Baker plc for
2

years that are from
January
20
10
to
January 2011
. This study will describe the importance of choosing the right
strategy. Internal and external analysis of Ted Baker plc is made in order to maintain the status as
the low cost
apparel, footwear and accessories
. It includes the model of the strategy in us
e. The
strategic choice of Ted Baker plc makes the company a leader in the industry. The company has
become an example in the strategic management because of its successful implementation of the
strategy. Internal and external analysis of Ted Baker plc sho
ws the set of managerial decisions
and actions that determine the long

run performance of a
group
. It includes environmental
scanning, strategy formulation, strategy implementation and evaluation and control. Ted Baker
plc is one of the leading
apparel, fo
otwear and accessories
companies in UK which offers a very
reasonable price, making the company the leader in low cost.

Financial Analysis
3



Overview

The financial performance of
Ted Baker plc shows

that the major portion of the assets is
comprised of liabilities; which is a good indication for the company as the company’s short term
and the long
-
term debts are stable. In addition to this, the company’s equity seems good or
satisfactory, and it is hi
gh as compare to the liabilities. Moreover, the total assets per share and
net assets per share reflect that the
Ted Baker plc
’s assets structure is in good shape which
shows that the company can meet its financial obligations that is liabilities, if some

sort of
financial loss occur. In addition to this, past studies states that the financial analysis are to
determine whether there are liquidity problems, the study of profitability determines the
evolution of the company and return on invested capital, ma
nagement and analysis of related
variables involved in the short
-
term financing, obtaining rotations and time of collection and
payment means.


Key Financials


(In GBP as of 01/29/2011)




Income Statement


Revenue

188m

Net Income

17m

EPS
-

Net
Income
-

Diluted

0.42

Revenue per Share

4.52

Balance Sheet


Total Assets

117m

Total Liabilities

41m

Shareholders' Equity

76m

Total Assets per Share

2.81

Net Assets per Share

1.83

Cash Flows


Cash from Operations

18m

Cash from Investing

-
11m

Cash

from Financing

-
8m

Financial Analysis
4


Cash Flow per Share

0.43


Ratios

As it is known that the most important factors in the well being of a
business, is to see
how the company operates at a profit and to organize it in order to be able to meet its liabilities at
appropriate times. If either of these points is not covered efficiently it could mean that the
business might have to be closed down.

This is the reason why we choose to calculate
profitability
,
liquidity
, asset management, debt
ratios

and per share

which are the most important
and reliable guides. In addition, various past studies states that we decide to calculate activity
ratios in order to see how efficiently the company like
Ted Baker plc
has managed its debt
management ratios, asset management
ratios and per share values to commend upon the
Ted
Baker
's sources of finance and whether a risk arises from increased debt.
Financial Analysis
5


Calculation Of Ratios For Ted Baker PLC












Profitability Ratios






1/

29/

2011




1/

2

9/

2010

ROA % (Net)

=

Net
Income

X 100

=

17,327,473

=

16.28

=

13,613,297

=

14.14



Total

Assets


106,448,50
0




96,244,000



ROE % (Net)

=

Net Income

X 100

=

17,327,473

=

24.35

=

13,613,297

=

21.19



Stock
holders' Equity


71,169,500




64,258,500



ROI % (Operating)

=

Operating Income

X 100

=

17,876,978

=

25.12

=

14,248,036

=

22.17



Inves
ted Capital


71,169,500




64,258,500



EBITDA Margin %

=

EBITDA

X 100

=

24,119,000

=

12.85

=

19,566,000

=

11.96



Reven
ue


187,700,00
0




163,586,00
0



Calculated Tax Rate %

=

Taxation

X 100

=

6,948,000

=

28.89

=

5,977,000

=

30.78



EBT C
ontinuing


24,054,000




19,418,000














Liquidity Ratios






1/

29/

2011




1/

29/

2010

Quick Ratio

=

Quick Assets

=

40,920,000

=

1.04

=

33,396,000

=

1.17



Current Liabilities


39,186,000




28,594,000



Current Ratio

=

Current Assets

=

83,800,000

=

2.14

=

67,387,000

=

2.36



Current Liabilities


39,186,000




28,594,000



Net Current Assets % TA

=

Net Current Assets

=

44,614,000

=

38.21

=

38,793,000

=

40.35



Total Assets


116,757,00
0




96,140,000














Debt Management






1/

29/

2011




1/

29/

2010

Interest Coverage

=

Operating Income

=

17,828,000

=

594.27

=

14,209,000

=

102.96



Non
-
Op Net Interest Income

-
30,000




-
138,000



Financial Analysis
6













Asset Management






1/

29/

2011




1/

29/

2010

Total Asset Turnover

=

Revenue

=

188,215,65
9

=

1.77

=

164,035,41
2

=

1.7



Total Assets


106,448,50
0




96,244,000



Receivables Turnover

=

Revenue

=

188,215,65
9

=

8

=

164,035,41
2

=

8.17



Receivables
-

Net
-

Avg over
Period

23,541,000




20,082,000



Accounts Payable Turnover

=

Revenue

=

188,215,65
9

=

12.86

=

164,035,41
2

=

11.94



Accounts Payable


14,640,000




13,743,500



Accrued Expenses Turnover

=

Revenue

=

188,215,65
9

=

67.06

=

164,035,41
2

=

52.17



Accrued Expenses


2,806,500




3,144,500



Property Plant &

Equip Turnover

=

Revenue

=

188,215,65
9

=

6.99

=

164,035,41
2

=

6.05



PPE
-

Net
-

Avg over Period

26,938,000




27,104,500



Cash & Equivalents
Turnover

=

Revenue

=

188,215,65
9

=

13.82

=

164,035,41
2

=

17.87



Cash & Equivs


13,617,000




9,179,000














Per Share






1/

29/

2011




1/

29/

2010

Cash Flow per Share

=

CFO

=

18,114,629

=

0.44

=

21,150,948

=

0.51



Shares


41,622,472




41,613,798



Book Value per Share

=

Book Value

=

76,024,000

=

1.83

=

66,315,000

=

1.59



Shares
-

Outstanding


41,623,784




41,618,476



Financial Analysis
7

Evaluation

Evaluation

Profitability Ratios

The profitability of Ted Baker plc is
s
atisfactory as the trends of the company from
2010
to 2011

shows that the company has been
increasing
its profits. This statement can be endorsed
by the evaluation of the profitability ratios. The return on assets of Ted Baker plc from
2010 to
2011

is reflecting that profitability structure of the company is
incr
eased
from
14.14

to
16.28
; the
return on assets describes the ability of the company's management to effectively use its assets to
generate profits. In addition, this ratio reflects the average yield obtained on all sources of capital
that are equity and d
ebt
. In addition to this, return on equity also shows
increase
over the years.
As the return on equity was
21.19

in 20
10

and
24.35

is in 201
1
.

This figure is often considered
one of the most important financial ratios. It measures the ability of a firm to
generate profits
from its net equity that is capital minus liabilities. However, all companies with high ROE are
not necessarily good investments. Some have a high ROE because they require little equity, for
example, consulting firm.


In addition to this,
return on investment and operating profit margin is also showing the
same
increase
in the profitability structure of Ted Baker plc.
Moreover,
the operating profit
margin shows
further increase
over the
year that is from 2010 to 2011.

Besides it, the tax ra
te is
increased
from
30.78

to
28.29

which seem to be a positive sign for the Ted Baker plc
; therefore,
the over all performance of the company is
encouraging for the investors
.




Financial Analysis
8

Liquidity Ratios

The liquidity ratios that include current ratio, quick ratio and net current assets as a
percentage of total assets are decreased from
2010 to 2011
. This shows that the liquidity position
of the Ted Baker plc is not satisfactory. The current ratio decreased from
2.36

to
2.14

from
2010
to 2011

respectively
; this ratio indicates the extent to which current assets cover current
liabilities. T
he quick ra
tio decreased from
1.17

to
1.04

from
2010 to 2011
; this shows that the
goods sold are extensively financed by suppliers (creditors). In addition to this, the net current
assets as a percentage of total assets
also
decreased from
40.35

in 20
10

and
38.25

in
2010. This
is mainly because there is little asset compared to liabilities of the firm. Inventory and receivable
days are also very short, and extra cash is quickly re
-
invested in acquiring stock or carrying out
expansion plans. Sales are mainly on a cash
and carry basis.


Assets Management Ratios

The assets management ratios that are the efficiency ratios of Ted Baker plc are also
supportive. The reason of this statement is that the turnover of the company is in favour of Ted
Baker plc. The total assets tu
rnover period was relatively stable over the period under review;
this shows efficient working capital management especially in terms of lead times
.

This
comparison shows that the turnover of total income to total assets it has value.

However,
the
Receivables Turnover of the company is
decreased which is a good indication for the company.
Moreover,
the Accounts Payable Turnover of Ted Baker plc is increased. Ted Baker plc’s
payable days in
2010

were
12

days and
13 days are in 2011.


Financial Analysis
9

Debt Managem
ent

The interest coverage ratio of Ted Baker plc is increased

that is from 102.96 in 2010 to
594.27 in 2011; therefore,
the company’s debt management structure shows a positive indication,
this is mainly due to
significant
increase in
interest coverage
.


Per Share or Investor Ratios


Cash Flow per Share

Cash flow per share measure the firm's financial strength.
The cash flow per share of Ted
Baker plc in 20
10 was 0.51
, this was due to the financial crises

and
the cash flow per share in
20
11 further decreas
ed to 0.44
. This shows a considerable
decrease as investors’ equity is
declining
, thereby
affecting
the shareholders wealth.


Book Value per Share

Ted Baker plc’s book value per share was
1.59

in 20
10

which increased in 2010 that is
.83
. This shows a
positive indication for the Ted Baker plc as the investor will get motivated
though this increase in the book value per share.


Conclusion

After the above analysis, it can be concluded that the Ted Baker plc’s financial
perform
ance in terms of profitabilit
y
, debt management and asset management is encouraging
for the Ted Baker plc

according to past trend
.
Moreover,
the use of debt that is obtained by the
Ted Baker plc is used efficiently and effectively.
However, the liquidity position of the Ted
Financial Analysis
10

Baker plc
is not satisfactory as the company might face difficulty to meet or pay its immediate
liabilities

due to which the cash flow per share is not
satisfactory
.

In addition to this, the book value per share is
encouraging; t
he
reason is that per share
value tha
t is
book value per share are showing the positive sign for the investors. Therefore, it
can be said that the investors will be attracted towards the company as the factors that include
book value per share
is one of the key factors
for the investors.

An evaluation of the business and financial performance of Ted Baker plc from the
2010
to 2011

financial years provided insight into how the Ted Baker plc performed and possibly what
the future holds. There are, however, some opportunities in the industry
which Ted Baker plc has
not taken advantage of, but overall it is performing well.



Financial Analysis
11

References


Will be provided on demand.