AAF044 Accounting and Finance Assignment Sample
Introduction
Main focus of this report is to determine the financial stability of Dixons-Carphone Plc in recent times. This research also shows competitors’ performances that are helpful to maintaining the development of global finance. This competitor’s performances and the organization’s performances are compared in this research to develop the details about the organization to maintain the comparison. Dixons-Carphone Plc operates its business in the UK in the field of retail services of telecommunication and electrical devices and it is established in 2014 in London (currysplc.com 2022). The organizational management uses “ratio analysis” as a crucial metric to detect the financial performance over the last two years. This research also shows the key features of Dixons-Carphone Plc and key resources of the business that can be beneficial to determine the financial needs of the organization.
Features of Dixons-Carphone Plc
In the present scenario, there are some crucial factors that can be identified by the management for expanding business in the global market. This context sheds light on the financial performance of the business in the global market that is necessary to ensure monetary stability (Stueret al. 2019). This organization provides products and a high range of telecommunication services in the global market. These service providers are also developing the details about the cushion organization by providing telecommunication services in the global markets.
Financial stability
This organization is able to show its development by maintaining its profitability in this research and by providing data about its financial stability in the global markets. This organization is financially strong and able to maintain its development by increasing its potential by increasing the developments. This organization is able to generate 1,0344 million dollars in 2021 (currysplc.com 2022). The financial ratio of the chosen organization shows that this organization is failing to maintain profitability in the global markets to maintain the development in “global finance” and develop the details about the chosen organization in this research. The revenue, profits, and balance sheet data are provided to detect the overall monetary performance of the company in last two consecutive years. However, this organization has failed to develop the details about the organization to maintain the profitability in this research and developments.
Key resources
Dixons-Carphone Plc is able to generate profitability in the organization by using the retained earnings on the organizational assets. There are various resources that are used in this research to maintain the developments in organizational progress (Weise et al. 2020). Equity financing, debt financing, and loan financing are the most common and important processes to collect or increase the money in the capital of the chosen organization.
Challenges
The organization is able to maintain its profitability in the global markets by adopting some strategies and developing activities. The main challenges that the organization is facing are huge global competition and marketing challenges due to pandemics (Facchini. and Dias, 2019).
Part A
Financial performance
The financial performance of Dixons-Carphone Plc has been evaluated through the ratio analysis. Company performance in terms of profitability, liquidity, and efficiency ratio has been evaluated. On the other hand, the performance of this company in the context of the investors has also been evaluated in this study.
| Ratio | 2020 | 2021 | Target | Industry | Analysis |
| Profitability | 0.4% | 1.8% | 5% | 8.4% | It is necessary for the company to reduce the expenses to enhance profitability and cope with the industry average. |
| Liquidity | 0.79 | 0.86 | 1.5 | 1.7 | |
| Efficiency | 2.39 | 2.7 | 3 | 2.5 | |
| Investment | 0 | 0.4 | 2 | 1.5 |
Table 1: Financial performance
(Source: Self-developed)
Analysis of profitability
The profitability of the company is the main activity on which its overall development and its growth vary. Ratios such as operating profit and net profit margin are evaluated in this study to assess the performance of Dixons-Carphone Plc in terms of generating profit from the company.
Assessment of the company operating profit margin of the company in 2020 it has been found that in 2020 this company has a net operating loss of 28 million pounds which has highlighted a negative operating profit margin of -0.275%. This operating profit margin has increased to 147 million pounds in 20021 which indicates that the performance of the company in terms of generating profit from its operation has increased.
Figure 1: Profitability analysis
(Source: self-created)
On the other hand, analyzing the net profit margin in 2020 it has been found that this company has a net loss of 163 million in 2020. Due to the impact of covid-19 this company is unable to generate profit for the company which has negatively impacted its financial health. However, this company is able to generate a net profit of 12 million after covering a previous loss of 163 million pounds. In this situation, it can be said that the performance of Dixons-Carphone Plc has increased in 2021 as compared to 2020. But margin on revenue is quite low which creates a barrier to competitive advantages in the market.
Analysis of liquidity
Liquidity is a significant aspect of the business through which it can be able to meet its day-to-day operational expenses. As argued by Herawati and Fauzia (2018, p.1078), ratios such as the current ratio and quick ratio are used as tools for measuring the liquidity performance of a company. In the present scenario performance of Dixons-Carphone Plc in terms of liquidity has been measured. In 2020 this company will have a current ratio of 0.82 which will decrease and stand at 0.75 in 2021. This highlights the company’s liquidity performance has declined in 2021 as compared to 2020. On the other hand, a quick ratio which is a refined version of the current ratio has been calculated which shows that in 2020 this company’s quick ratio of 0.51 has declined and stood at 0.30 in 2021.
Figure 2: Liquidity analysis
(Source: self-created)
Analysis of the gap between the current ratio and quick ratio it has been found that the high amount of inventory in current assets leads to a case such a high difference between the current ratio and the quick ratio between two financial years (Estininghadi, 2019). The reduction of the total current in 2021 is the main cause behind the reduction of the liquidity performance of Dixons-Carphone Plc in 2021. Thus, it is recommended that this company manage its working capital in a more systematic way through which an effective efficiency ratio can be maintained.
Efficiency ratio analysis
This financial matrix plays a significant role in the assessment of economic performance in terms of the utilization of resources. The asset turnover ratio is one of those financials through which the performance of the company in terms of utilization of its asset in terms of revenue maximization can be assessed (Supriatiet al. 2019). Based on an analysis of the asset turnover ratio of Dixons-Carphone Plc in 2020 it has been found that in 2020 this company has an asset turnover of 1.32 which is quiet.
Figure 3: Efficiency ratio analysis
(Source: self-created)
On the other hand, in the financial year 2021, this ratio has increased to 1.50 due to an increase in the number of total sales. In this situation, it has been found that the asset turnover ratio has increased in 2021 as compared to 2020. As argued by Agustina and Mulyadi, (2019), this highlights the performance of Dixons-Carphone Plc in terms of utilization of its resources for revenue maximization which is financially beneficial for the company.
Investors ratio
Investors’ ratios are quite significant in shareholder engagement. Ratios such as the debt-equity ratio are used to highlight the performance of Dixons-Carphone Plc in terms of meeting stakeholders’ engagement. As argued by Kurniawan (2021, p.64), the debt-equity ratio highlights the capital structure of the company through which the weightage of debt and equity in the capital structure can be assessed.
Figure 4: Investors ratio analysis
(Source: self-created)
Assessment of debt-equity of the company has found that Dixons-Carphone Plc has a debt of 1.03 over its equity in 2020. This indicates that the company is highly dependent on debt over equity which is not good for shareholders’ engagement. However, this ratio declined in the financial year 2021 and stood at 0.79. This indicates the company is using both debt and equity sources of finance which is good for its financial health.
Part B
In this research, the competitive organizations of the AO world and this organization are also detailing the telecommunication services in the global markets. The ratio analysis is the most effective tool that is used in this research to build the development and the resources of the chosen organization to build the development in this research (Alarussi and Alhaderi, 2018). There are four ratios has been measured in this research to build the differences in this research and developments There are various resources used in this research to provide the development and the development in the action of the organization. This research provides details about the chosen organization and its competitors to develop an understanding of the chosen organizational performances in the global markets.
Figure 5: Operating ratio
(Source: self-created)
With the help of the figure, it can be seen that the OP for AD world, Dixon Carphone and Caconomy for 2021 is 1.8%, 0.3%, and 0.95%. The same ratio for 2020 for the companies is 0.49%, -1.40%, and 1.04%. The ideal ratio is above 20%. The three companies in both years have not been able to reach the ideal ratio (Yaqoobet al. 2022). This happens since companies are not able to increase the sales which not only helps to increase the revenue but also meets the operating expenses with ease and increases the profits. For the three companies, 2021 has been a better year with AD world having the highest ratio this shows that the company in 2021 had generated enough sales which have helped the company to meet the operating costs and increase its operating profits. For improving this companies should invest in technologies that can help companies to become efficient and increase profits.
Figure 6: current ratio
(Source: self-created)
From the above figure, the current ratio of Dexoncarphones can be assessed whereas the current ratio of the year 2020 and 2021 can be assessed. The current ratio helps in assessing the liquidity of a company as to how efficient a company is in paying for its short-term liabilities. It is calculated by dividing the current ratio by current liabilities (Yameenet al. 2019). The current ratio of AO world in the year 2021 has been 0.86 and for 2020 it has been 0.79. On the other hand, the current ratio of Dixon-Carphone plc has been 0.75 and 0.82 respectively in the same year (Wsj.com, 2022). On the other hand, the current ratio of the economy for the same financial period has been 0.93 and 0.87. Therefore, from the analysis of the calculation, it can be said that all three companies have failed to achieve the ideal current ratio in the following financial period as the ideal current ratio is 1:1. Therefore, it can be said that the liquidity power of all the three companies has been low in the two financial periods. However, from a comparison point of view, it can be said that economy has a better ratio as compared to its peers as the current ratio of the company has been more comparatively.
From the recommendation point of view, it can be said that changes in credit term policies, sale of unused assets and increasing the current assets can be some of the measures to increase the current ratios.
Figure 7: asset turnover ratio
(Source: self-created)
With the help of the graph, it can be seen that the ART of 2020 for Caconomy, Dixon-Carphone Plc, and Ad world is 0, 1.32, and 2.39. The companies in 2021 had ATR of 2.01, 1.5, and 2.7. The ideal ratio is above 2. Economy and Ad world in 2020 and Ad world in 2021 had been able to reach the ideal ratio. This has happened since companies have been able to properly utilize their assets for increasing sales and generating revenue. In both 2020 and 2021 (Wsj.com, 2022), AD World has been able to obtain the highest ratio (Wuaveet al. 2020). This helps to understand that the company has implemented its assets properly which has helped the company to increase sales and increase revenue.
To improve this, the company can properly manage its inventory. Apart from that, considering the ART of the economy for the year 2020, it can be observed that it is calculated as 0 which shows that the company has been unable to make use of assets wisely to generate income in the business. Considering the ideal ATR, it is ranges to 2.5 in the retail sector which is only achieved by the AO world which shows that the company made effective use of its assets to generate income in the ness (Kiarieet al. 2019). For the other two companies, it is recommended that an increase in the value of the assets can improve the Assets turnover ratio of the company.
Figure 8: earning per share ratio
(Source: self-created)
The investment ratio refers to the type of ratio that helps to identify the ability of a company in order to make investment in a project or a company. In this regard, this research has considered Earning per Share of Caconomy and Dixons-Carphone Plc as it helps to identify the ability of these companies in order to invest funds in a project.
This figure has shown that the EPS of Caconomy stands at £0.54 and £0.60 in the year 2020 and 2021 respectively (SUDHARTO, 2021). On the other hand, Dixon has EPS of £0.70 which increases to £17.10 in the year 2021. Based on this analysis, it is identified that Dixons has a better investment position than Caconomy.
Conclusion
This context shows the development in this research to the organizational stability in the global markets there are various sources and the financial data are sued in this research to maintain the developments in this reach those data are related to the ratio analysis and the financial stability to maintain the development is this research, provide all the details related to its “financial stability” and the development of the chosen organization in this research to maintain the development in the global finances. This research is also able to show the developments of the chosen organization to maintain the knowledge about the cushion organization. The ratio analysis shows that the chosen organization is not in a good position to invest and has a negative impact on the development of the global markets to beat the organizational stability in the global markets.
In this research, the ratio analysis is made to understand the stability of the chosen organization in this research. The financial stability of the chosen organization is able to provide a complete understanding in this research to build the development in this research. After completing the current ratio, operating profits, asset turnover ratio, and the investing ratio are used in this research to build complete knowledge about the financial analysis. After all Thai research, it can be said that the organization may be in a good position compared to its last year’s performance but failed to attract investors due to its bad performance. As the “operating profit margin” of Dixons-Carphone Plc are -0.4% and 1.8% respectively in the last two financial years, the organizational management is recommended to reduce the “operating expenses” to ensure better profitability. It is also beneficial for ensuring monetary sustainability of the company.
References
Journals
Agustina, D.N. and Mulyadi, M., 2019. Pengaruh debt to equity ratio, total asset turnover, current ratio, dan net profit margin terhadappertumbuhanlabapadaperusahaanmanufaktur di Bursa Efek Indonesia. Advance, 6(2), pp.106-115.
Alarussi, A.S. and Alhaderi, S.M., 2018. Factors affecting profitability in Malaysia. Journal of Economic Studies.
Estininghadi, S., 2019. Pengaruh Current Ratio, Debt Equity Ratio, Total Assets Turn Over Dan Net Profit Margin TerhadapPertumbuhanLaba. JAD: JurnalRisetAkuntansi&KeuanganDewantara, 2(1), pp.1-10.
Facchini, E. and Dias, E.M., 2019. The importance of developing control processes and methods for urban bus services.
Herawati, A. and Fauzia, F.I., 2018. The effect of current ratio, debt to equity ratio, and return on the asset on dividend payout ratio in sub-sector automotive and components listed in Indonesia stock exchange in the period 2012–2016. KnE Social Sciences.
Kiarie, J., Kirori, G.N., and Wachira, D., 2019. Moderating Effect of Gearing Ratio on the Relationship between Loyalty Programs and Financial Performance of Selected Firms in Service Industry in Kenya. Journal of Economics, 3(1).
Kurniawan, A., 2021. Analysis of the effect of return on asset, debt to equity ratio, and total asset turnover on share return. Journal of Industrial Engineering & Management Research, 2(1), pp.64-72.
Stuer, D., De Vos, A., Van der Heijden, B.I. and Akkermans, J., 2019. A sustainable career perspective of work ability: the importance of resources across the lifespan. International journal of environmental research and public health, 16(14), p.2572.
SUDHARTO, S.V., 2021. PENGARUH FIRM SIZE, PROFITABILITY, GEARING RATIO DAN PUBLIC OWNERSHIP TERHADAP RISK DISCLOSURE (STUDI EMPIRIS PADA PERUSAHAAN NON-CYCLICALS YANG TERDAFTAR DI BURSA EFEK INDONESIA TAHUN 2018-2020) (Doctoral dissertation, UniversitasTarumanagara).
Supriati, D., Kananto, R. and Kusriananda, A., 2019, February. The effects of intellectual disclosures capital, debt to assets ratio, debt equity ratio, company size, and assets turnover on company profitability. In the 5th Annual International Conference on Accounting Research (AICAR 2018) (pp. 104-109). Atlantis Press.
Weise, S., Lohwasser, U. and Oppermann, M., 2020. Document or lose it—on the importance of information management for genetic resources conservation in genebanks. Plants, 9(8), p.1050.
Wuave, T., Yua, H. and Yua, P.M., 2020. Effect of liquidity management on the financial performance of banks in Nigeria. European journal of business and innovation research, 8(4), pp.30-44.
Yameen, M., Farhan, N.H. and Tabash, M.I., 2019. The impact of liquidity on firms’ performance: Empirical investigation from Indian pharmaceutical companies. Academic journal of interdisciplinary studies, 8(3), pp.212-212.
Yaqoob, T., Omer, Z. and Fatima, S., 2022. Understanding the effects of banking profitability in Pakistan. International Journal of Financial Engineering, 9(02), p.2150003.
Websites
currysplc.com (2022), “Financial data about the”, Available at: https://www.currysplc.com/. [Accessed on: 16-08-22]
currysplc.com (2022), Financial performance, Available at: https://www.currysplc.com/news-media/press-releases/2021/dixons-carphone-full-year-results-2020-21-strong-performance-in-a-challenging-year/ [Accessed on 16/08/2022]
Wsj.com, (2022), “caconomy financial statements”, Available at: https://www.wsj.com/market-data/quotes/XE/CEC/financials/annual/income-statement. [Accessed on: 16-08-22]
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