AAF044-6 Accounting and Finance Assignment Sample
AAF044-6 Accounting and Finance Assignment Sample
1) Introduction:
This report, there are mainly discussed the financial performance as well as analyzes the financial position of that company. As it is also known that the company in this report are taken which is “FirstGroup plc”. This report also discussed about the performance of that company and analyzes the performance of its competitor.
Background of the company:
As it is also known that there are mainly taken the company, which is “FirstGroup plc”. As it is also known this company is mainly known as “a British multi-national transport group,“ and also it is known that this company mainly belongs to the travel industry. Although this business, which is listed on the LSE, has been named the UK’s top “leading brand”. This company’s entire revenue was determined to be $7.3B, and it required capital in the amount of $370.40M.
That business also runs financial activities with a sizable workforce base of over 124000 people and provides support to more than 2.5 billion travelers annually or per year. Due to the nation’s rapid “technological advancement”, which enables the business to reduce expenses and boost their business profitability, all of these objectives have been made achievable for the organization.
One more thing that is because of the nation’s growing gasoline prices and its insistence that people utilize public transportation rather than private transportation, this corporation has discovered yet another chance to grow its business. As a result, it will aid in both the growth and expansion of the firm or that organization.
The financial position of the company and challenges:
Even though this firm is expanding and has the ability to do business worldwide, it still faces certain difficulties in achieving its goals and objectives. The firm is being held back by these problems. The growth of their rivals in the same industry has been identified as the primary problem (Chávez, et al. 2019, p.14). Apart from that there are also known this company is also facing some difficulties or the challenges in its business process or activity (Saeed, and Kersten, 2019, p.14).
It is also known that one of the major challenges which are faced by the company is an economic downturn. The economic downturn also impacted the financial performance as well as the financials of the company. In this report, the “decision-making process” of the company about the partnership is also discussed.
The company is also facing the increment of their production cost due to the economic downturn condition and that influences the financial stability of the company (Devi, et al. 2020, p.12). As a result, this report will outline “FirstGroup PLC’s financial health and financial stability” and help the partnership’s decision-making process.
2) Analyze the financial performance of FirstGroup plc using financial ratios:
Profitability Ratio:
There are also known that the above figure also shows the calculation of the profitability ratios of “FirstGroup Plc. As it is also known that the profitability ratios are more important to determine the financial performance as well as the financial health of the company (Anggraini,2022, p.16). Apart from that it is also known that the profitability ratio is a more important “financial matrix” that aids the company in determining or identifying its capacity to make money within a specific fiscal year. This ratio may be used to gauge an organization’s financial success since it shows how profitable the business is becoming.
There are mainly discuss or analyze two main types of profitability ratios that are Gross profit and the second ratio that is “Net profit ratio” which are calculated and analyzed here (Nikolaos, et al. 2020, p.12). There is also seen in the above figure there are also seen that the gross profit margin of that company seems to be increased from 2020 to 2021 which is 38.79% to 47.33% and after that, there also seen that decrease from 2021 to 2022 from 47.33% to 46.20%. Apart from that there are also seen that net profit margin of that company is also seen there and after seeing that percentage of a net profit margin there are said that the net profit margin of that company is impacted and continuously declined from 2020 to 2022 which is -7.26% to -0.24.
Liquidity Ratio:
The liquidity ratios are also calculated here as per calculation there are also seen there are mainly two ratios calculated that are current ratio and the second is Quick ratio (Bintara, 2020, p.13). As it is also known that the current ratio of the company seems to be constant from the last some years that is from 2020 to 2022 which are recorded as 0.76,0.78 and 0.76 respectively.
Apart from that there are also seen that the quick or acid test ratio of that company is also calculated here. As per that calculation, there are also seen that the quick ratio of that company is also constant which is 0.74, 0.77, and 0.74 respectively. There is also seen that the current and quick ratio of that company is not more changes in the last three years.
Efficiency Ratio:
| Efficiency | |||||
| Inventory turnover period | (Closing inventory/cost of sale) *365 | Closing inventory | £ 29.00 | £ 29.00 | £ 63.00 |
| cost of sale | £ 1,731.00 | £ 1,591.00 | £2,210.00 | ||
| 6 | 7 | 10 | |||
| Trade Receivable | (Trade receivable /sales) *365 | Trade receivable | £ 616.00 | £ 602.00 | £1,090.00 |
| Sales | £ 4,591.00 | £ 4,319.00 | £4,643.00 | ||
| 48.97 | 51 | 86 | |||
| Trade payable | (Trade payable / cost of goods sold) *365 | Trade payable | £ 253.00 | £ 182.00 | £ 337.00 |
| Cost of goods sold | £ 1,731.00 | £ 1,591.00 | £2,210.00 | ||
| 53.35 | 41.75 | 55.66 | |||
| Cash operating cycle | (Inventory turnover period Trade receivable +Trade payable) | 2 | 15.77 | 40.43 |
Table 1: Calculation of the Efficiency ratio of FirstGroup PLC (Sources: Self-created)
The Efficiency ratios are also discussed here. The above table also shows the calculation of four major efficiencies ratios that are Inventory turnover period, Trade receivable, trade payable and the last ratio, which is also the cash operating cycle, is calculated here for that company. The inventory turns over the period of that company also seen decreased from 2020 to 2022, which seems to be good or better for the company. It means the company is more focused for increases revenue of their company. There is also seen that in 2020, the inventory turnover ratio of that company is 10 and in 2022 that is 6.
Apart from that there are also calculated the trade receivable days for “FirstGroup PLC”. There are also seen this ratio also decreased from 2020 which is again better for the company because it is indicating that the company is collecting from their customer more quickly. There are also seen that the trade receivable days for that company seem to be 86,51 and 48.97 respectively.
Apart from that there are also seen in the calculation of the Trade payable ratio. From the above calculation, there is also seen that the Trade payable days of that company seems to fluctuate they are seen that in 2020 the payable days are 55.66, and in 2021 that is 41.75, and after that, this again increased to 53.35.
At last, there is also seen the calculation of the cash operating cycle of that company. As per the above calculation, there are also seen that the Cash operating cycle of that company is decreased since 2020 It means the company has greater liquidity in terms of its cash flow. There are also seen that from 2020 to 2022 there are recorded as 40.43,15.77 and 2 in 2022.
Market performance:
| Market performance | 2022 | 2021 | 2020 | ||
| Earnings Per Share | Net Profit No Ordinary shares |
NPAFOS | -£ 11.00 | £ 10.00 | -£ 337.00 |
| No Ordinary shares | 877 | 1,178 | 1,210 | ||
| -0.01 | 0.01 | -0.28 |
Table 2: Calculation of the market performance ratio of FirstGroup PLC (Sources: Self-created)
At last, there are also analyses or calculations of the market performance ratios, which are earning per share that ratio, are also indicating the market performance of that company. There are also seen that earnings per share of that company seem to be negative that is -0.28, 0.01 and -0.01 respectively. That is also not better for the company along with that this is not good for the company and has a bad impact on the investor.
For the market performance the company estimate the synthetic peer group method. To compare the market evaluation the company observe the market situation. The main performance observe the median absolute valuation error. The company observe 15 percent market value. The market performance evaluate through price to customer ratio. Enterprises value the EBDIT of the firm for market performance. The company market performance its peak. If there are minorities interest and preferred share then the market firms value is capitalized.
Recommendation:
At last, there are also recommended that FirstGroup Plc is required to more focused to improved its net profit margin as well as they are also needed to improve its trade payable days. Apart from that there is also seen that the EPS of that company is also bad performance so the company also needs to improve its EPS because there is also known that improved EPS is always attracted more investors for the business or the company.
Through the companies can also improves their financial performance as well as which also helps to improve the financial health of FirstGroup Plc. At last, this ratio analysis also makes it simple to understand that the corporation has to improve organizational “efficiency and liquidity”. It will improve the potential for profit growth as well as the performance of the business.
3) Comparison of performance with National Express Group PLC
Profitability ratio
The comparison of the profitability performance of both of these firms FirstGroup PLC and National Express Group PLC will be clearer with the preview of this graphical representation. According to this graph, the GPM of both of these companies for the years of 2022 to 2020 of FirstGroup PLC has stood at 46.20%, 47.33%, 38.79%, and National Express Group PLC at 38.68%, 31.38%, and 22.70% performance respectively. This comparison is reflecting the higher value of GPM of FirstGroup PLC instead of National Express Group PLC.
In the same way, the comparison of NPM is reflected as of FirstGroup PLC at -0.24%, 0.23%, and -7.26%, and for National Express Group PLC is 14.28%, 13.36%, and 8.95%. According to this comparison, a higher value of NPM has been found for National Express Group PLC. So, the calculation is reveling the higher profitability of National Express Group PLC than the company FirstGroup PLC.
Liquidity ratio
The comparison of liquidity is reflected as the value of current assets of FirstGroup PLC has stood at the value of 0.76, 0.78, and 0.76, and of National Express Group PLC has stood at 0.58, 0.83, and 0.88 respectively. The outcome of this calculation is a reveling result as the value of current assets of FirstGroup PLC is higher in the year 2022 than National Express Group PLC.
In the same way, the quick ratio of FirstGroup PLC from 2022 to 2020 is at 0.74, 0.77, and 0.74, and of National Express Group PLC is at 0.56, 0.81, and 0.86 respectively. Thus, in this calculation, the value of the quick ratio of FirstGroup PLCin the year 2022 is higher than National Express Group PLC.
Efficiency ratio
The presentation below chart is reveling the comparison of the efficiency in the business activities of both of these companies named FirstGroup PLC and National Express Group PLC. According to this comparison, the “Inventory turnover period” of National Express Group PLC is higher than the value of FirstGroup PLC in the year 2022. From the year 2022 to 2020 the value of the “Inventory turnover period” has stood at the value of 6,7,10 days and of National Express Group PLC has stood at the value of 7 for each year.
The trade receivable period of FirstGroup PLC has stood at 48.97, 51, and 86, and of National Express Group PLC has stood at 57, 59, and 59 respectively. The trade payable period of FirstGroup PLC has stood at 53.35, 41.75, and 55.66, in the same way, as National Express Group PLC has stood at 62.95, 51.23, and 55.76 respectively. The cash operating cycle of FirstGroup PLC has stood at 2, 15.77, and 40.43 respectively, and of National Express Group PLC has stood at 1.02, 14.75, and 9.53 respectively. Thus, all these values of FirstGroup PLC are higher in the year 2022.
Market performance
The comparison of the market performance of both of these companies has been made by composting the value of EPS. this EPS has been compared for the years 2022 to 2020. The value of EPS from 2022 to 2020 for the company FirstGroup PLC has stood at -0.01, 0.01, and -0.28, and in the same way, the value of National Express Group PLC has stood at 0.30, 0.20, and 0.12. Thus in the year 2022, the value of EPS of FirstGroup PLC is lower than the value of National Express Group PLC.
Recommendation:
Thus, with the help of all such comparisons of profitability, effectivity, liquidity, and market performance the values of FirstGroup PLC are higher than the values of National Express Group PLC. Thus, the opportunity that has been found for the company FirstGroup PLC is not notable for this company National Express Group PLC as well. Thus, the company National Express Group PLC should proceed with making the business activities more effective and operating the organizational operations efficiently. It will help the organization find all the opportunities to increase profitability along with business growth.
4) Discussion on the joint venture
The joint venture is the process of combing resources, funds, assets, liabilities, and all the business activities of two different organizations to make both of these companies profitable. It helps firms to increase the effectiveness of their business activities and ensures business growth. With the help of this process of a joint venture, the company will be able to adopt various strategies and approaches in the organization (Chan et al. 2022, p.03).
It will help to increase the efficiency of business activities. Thus, the company FirstGroup PLC also has the offer to accept this option of the joint venture. For this purpose of making a decision regarding the joint venture, the company should consider the internal and external stakeholders of the organization. Thus, all the internal and external stakeholders are analyzed below.
Price to book value used for the constant growth of the company. Analysts used valuation method to improve its ratio analyses. Price to sale ratio compared with the share values only. Price to units’ methods are used to know the value of soft drinks and consumers product. Joint venture is support for the growth of the company. It is effective for generating revenues. Relative’s multiples. The company is following price to leverage free flows of cash. The requirement of continuous favors entity over value of equity methods less affected. Multiples on value drivers close to income.
Internal stakeholders
The term internal stakeholder refers to the respected persons who are internally related to the organization and operate the operations. In this respect, the internal stakeholders of the organization have been found as the board of directors, employees, leaders, managers, executives, and so on who are related to the internal business activities (Catanăet al. 2021, p.05). The company should check out these stakeholders’ requirements and by mitigating such demands need to satisfy them.
External stakeholders
In the same way, external stakeholders refer to the person who is interrelated with the external activities of the organization. Thus, the external stakeholders of the firm have been identified as the shareholders, targeted customers, permanent customers, legal authorities, social bodies, regulators, and so on (Nguyen et al. 2019, p.11). The needs of these stakeholders also need to be mitigated for the profitability of the firm.
Thus, with all this discussion it can be said that the company should accept this option of a joint venture to increase profitability and business growth as well.
Referencing:
Catană, Ş.A., Toma, S.G. and Barbu, A., 2021. The effects of the COVID-19 pandemic on teleworking and education in a Romanian higher education institution: an internal stakeholders perspective. International Journal of Environmental Research and Public Health, 18(15), p.8180.
Chan, A.P., Tetteh, M.O. and Nani, G., 2022. Drivers for international construction joint ventures adoption: a systematic literature review. International Journal of Construction Management, 22(8), pp.1571-1583.
Chávez, C., Dresdner, J., Figueroa, Y. and Quiroga, M., (2019). Main issues and challenges for sustainable development of salmon farming in Chile: a socio‐economic perspective. Reviews in Aquaculture, 11(2), pp.403-421.
Devi, S., Warasniasih, N.M.S., Masdiantini, P.R. and Musmini, L.S., (2020). The impact of COVID-19 pandemic on the financial performance of firms on the Indonesia stock exchange. Journal of Economics, Business, & Accountancy Ventura, 23(2), pp.226-242.
Nguyen, T.H.D., Chileshe, N., Rameezdeen, R. and Wood, A., 2019. External stakeholder strategic actions in projects: A multi-case study. International Journal of Project Management, 37(1), pp.176-191.
Nikolaos, Z., Christos, K., George, T. and Efstratios, L., (2020). Financial analysis of major retail chains within a turbulent economic environment. Studies in Business and Economics, 15(3), pp.208-222.
Saeed, M.A. and Kersten, W., (2019). Drivers of sustainable supply chain management: Identification and classification. Sustainability, 11(4), p.1137.
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