Analysis of Marks and Spencer Group PLC

Analysis of attach and Spencer Group PLCThe principal activities of the companionship are retailing clothing, food and home products. Marks Spencer operates in the secondary and third sectors. It operates in the secondary sector as it manufactures finished goods and it is associated with textile production. It operates majorly in the tertiary sector as it provides goods and services to the population and to other businesses.A mathematical group of companies is one which consists of two or more(prenominal) than companies between which there is a parent/subsidiary relationship and they are usually under the same self-control and maybe management. The group balance sheet will differ from that of the beau monde since it includes the enumerate of distributively individual company balance sheet of all the companies unitedly us one compared to the company balance sheet which includes all the transactions of the company.i) total assets 7258.1 millionstotal liabilities 5157.5 mil lions loot assets 2100.6 millionsii) The difference between the total assets and the total liabilities is the net assets which can be also called as the groups capital. When you add the fixed assets with the current assets and then subtract the current liabilities from the Balance sheet, the total that you write down is called net incomes Assets.i) profit after tax (52 weeks ended 28 March 2009) 506.8 millions(52 weeks ended 29 March 2008) 821.0 millionsNet profit rim 2009 5.6%2008 9.1%ii) The net profit margin has significantly fell because of the exceptional costs incurred to the tauten during the current accounting period due to the economic recession that affected considerably the markets MS operates in. The unshakable had to spend 135.9 millions on exceptional costs, due to a change in its strategies, compared to 2008 when it had no exceptional costs.i) MS uses straight line method acting which is a method that allocates the tot to be depreciated evenly over the usef ul life of the asset. Some of MSs uses of derogation are the followingFreehold land non depreciatedFreehold and studyhold buildings with a remaining lease term over 50 years depreciated to their residual value over their estimated remaining economic livesLeasehold buildings with a remaining lease term of less than 50 years over the remaining period of the leaseFixtures, fittings and equipment 3 to 25 years according to the estimated life of the asset.ii) The straight-line method of depreciation is a method that allocates the amount to be depreciated evenly over the useful life of the asset. For example for something with a total cost of 500 and an estimated useful life of 5 years, using the straight-line method, the annual depreciation charge will be 100. On the other hand the trim balance method is the method in which the depreciation is expressed as a fixed percentage on the reducing balance of an asset. In simpler words the amount of depreciation gets reduced every year. For an asset of a total cost of 500, using the reducing balance method by 20%,it means that the value of the asset will decrease 20% of its value each year. After year 1, the net book value will be 400 and then for the next year the value will drop to 320 and so on.iii) Property, Plant and Equipment as at 29/3/2009 4.834.0 millions(a) 725.1 millions straight line depreciation(b) 1450.2 millions reducing balance depreciationiv) By using the straight-line method of depreciation the reported profit of the group will be reduced by close to 400 million as depreciation is placed under the expenses kinsfolk in the income statement and it will also be deducted from the assets current value in the balance sheet. On the other hand, by using the 30% reducing balance method, profit will decrease even more and the assets value on the balance sheet will be reduced even more. The more depreciation they charge the less net profit they get for the current period.i) 285.2 millionsii)1371.9/365=3. 76 millions/day 285.2/3.7676 days worth of sales.iii) The ratio of trade debtors and customers to sales is slightly 20%. This seems quite high but for such a large company like Marks and Spencer, which generates so much cash from operations (sales), is non much of a concern. However it would be better for the company to try and minimize this ratio in the next years.Stewardship accounting is the provision of information by managers to owners for the purpose of avoiding a potential conflict between managers and owners. Directors act as agents of the shareholders, or as stewards on their behalf. The stewardship function requires directors to act in the best interests of the company at all times. Where shareholders are remote from the management of their company there is potential for the directors to take action that benefits themselves rather than benefiting the shareholders. This is one of the potential problems of the stewardship relationship. If directors wish to circumvent fina ncial information they are well placed to do so. Shareholders can be assured that the annual financial information they receive has not been depraved by requiring an audit by an independent auditor. Until recently all companies were required to have an audit of their annual financial statements.i) current Ratio= afoot(predicate) Assets/ Current Liabilities= 1389.8/2306.9= 0.601Quick Ratio= (Current Assets- Stock and prepayments)/ Current liabilities= (1389.8-536.0)/2306.9=0.371ii) The current ratio and the quick ratio are both liquidity ratios. They are normally used to assess the liquidity of a business. As a general rule, a current ratio of 1.5 or greater can meet near-term in operation(p) needs sufficiently. A higher current ratio can suggest that a company is hoarding assets instead of using them to grow the business not the worst thing in the world, but its something that could affect long-term returns. The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. An acid-test of 11 is considered satisfactory unless the majority of your quick assets are in accounts receivable, and the pattern of accounts receivable hookup lags behind the schedule for paying current liabilities.i)There are many factors that determine the share values but only some factors can directly influence them. oneness of these factors is demand and supply. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price increases and when more people are selling the stock, the price falls.Secondly news is a huge factor that influences the shares price. Positive news about a company can increase buying interest in the market while negative news can decrease it. It is the overall performance of the company that matters more than news.The earning per share is the profit that the company made on the last quar ter and it is also a huge factor that can affect the share prices. every(prenominal) public company needs to publish a quarterly report that states the earning per share. By this way they influence the buying tendency in the market resulting in the increase in the price of that particular share. So, one needs to watch on the quarterly reports of the companies and before buying any shares.ii) MarksSpencer Share pricesMy evaluation of Marks and Spencers performance thus far for this current accounting period is positive. First of all the company uses a long term plan and any ill-judged term decreases in revenues or profits is acceptable. The profit margin ratio has increased in 2009 from 13.43% to 23.45% so despite the recession MS managed to increase its profit margin. On the other hand the earning per share has decreased for 2009 from 0.49 to 0.32 per share. Though the profit margin has increased the earning per share has decreased and that is not positive for us investors. The fi rm might have a long term plan that is indeed promising but thus far this season we investors are concerned about the effect of the recession on the firm and more specifically on our earnings per share.