Great BU7006 Strategic Management Sample
Introduction
Strategic financial management refers to the approach of organization of monetary resources and data related to financial assets which assist the business to plan, organize, direct and control the business processes.
The decision making of the businesses and the perspective of stakeholders are properly maintained through undergoing financial calculations for the business.
Stable financial performance of business attracts most of the investors for investing into the operation of firm which increases the working capital of business.
The boss of Sports Direct had accused their shareholders for undertaking the furious attack of stabbing which results the stepping down of Keith Helliwell.
It has created a serious concern for the firm as stated by West Yorkshire Police (Mirror, 2018).http://Great BU7006 Strategic Management Sample
In this report, the financial summary of the business has been described with aligning financial performance which is demonstrated through different ratios such as profitability ratio, solvency ratio, investment ratio and liquidity ratio.
Moreover, assessing the development of Sports Direct by reviewing the perspective of stakeholders and possible challenges with opportunities with respect to non-financial and financial components.
Applying ratio analysis for evaluation of Sports DIRECTV’s financial performance
Analysis of the financial ratio is indicated as the quantitative approach for gaining in-depth analysis related to efficiency, profitability, share value and liquidity.
As mentioned earlier, the CEO of Sports Direct had accused their shareholders and chairman for not cooperating with the business decisions which has caused serious conflict related to continuing the business operations.
The overall performance of the business is demonstrated through comparing the financial ratios with respect to past year (Eckerd & Jepsen, 2016).http://Great BU7006 Strategic Management Sample
The identification of potential field of improvement and strategy according to business capabilities are undertaken for maximizing the performance.
In this section, the performance of business are demonstrated through profitability ratio, solvency ratio, liquidity ratio and efficiency ratio.
Profitability ratio
Profitability ratios are considered as the particular financial metrics which is mainly applied for evaluation of business capability to generate sufficient revenue for compensating all the liabilities and costs that adds value to the shareholders (Kimmel, et al., 2016).http://Great BU7006 Strategic Management Sample
The productivity of business has been associated with the profitability as both are directly proportional.
The profitability ratio of Sports Direct and change in the factor for past 6 years has indicated the financial stability and performance of the business.
The gross profit margin has been decreased gradually for Sports Direct in between 2013 and 2014 and now it has reached to 39.74% in 2018 from 59.45% in 2012.
The operating profit for the business has also minimized from the past record as maximum value for operating profit has been reflected in 2015 as 10.43% which has reached to the current value of 6.45%. The revenue generation of business has increased gradually due to rising cost related to diversified equipment which also justifies the hike in operational profit and gross profit.
The revenue generation has been indicated as $3359.5 million in 2018 from $1835.8 million in 2012 (Sports directly, 2017).http://Great BU7006 Strategic Management Sample
The operational profit was maximum in 2015 which was $295.6 million which has reduced to $217 in 2018. Moreover, the gross profit has been increased for the business from $1091.5 million in 2012 to $1335.1 million in 2018.
Thus, the rising gross profit and operational profit has indicated the rising demand for customer whereas lowering the percentage reflects higher consumption of operational cost.
Solvency ratio
Solvency ratio is also termed as the financial calculation which is based on the assets and liabilities of business that also reflects the financial capability (Gitlow, et al., 2018).http://Great BU7006 Strategic Management Sample
The actual cash flow of the business and ability for composting the liabilities are also expressed through the ratio.
For calculating the solvency ratio of Sports Direct, the total assets and liabilities along with debt ratio has been interpreted for past seven years.
The total assets of business has increased rapidly as the profit generation of the firm has also raised.
Total assets of business has raised from $1132.18 million in 2012 to $2849.6 million in 2018. As the operational cost of the business has also maximized which justifies the rising of total liabilities.
The liabilities of business has been emerged from $660.29 million in 2012 to $1635.4 million in 2018.
On the other hand, debt ratio is characterized as the ratios for total assets and liabilities which is expressed as percentage.
The debt ratio of Sports Direct has not changed much due to both increasing for total assets and liabilities. The debt ratio for the business has increased from 49.43% in 2017 to 57.39% in 2018.
Liquidity ratio
Liquidity ratio is characterized as the important financial characteristics which have concerned with the capability of the business for compensating the debt of the business and continues regular process (Barr & McClellan, 2018).http://Great BU7006 Strategic Management Sample
The liquidity ratio of the business has been expressed through representation of acid test ratio and current ratio.
Current ratio is considered as the particular type of liquidity ratio which has described the financial capability of business for paying short term obligations which has justifies the investors for rising their assets for meeting the obligations.
The current ratio for Sports Direct has been increased from 1.71 in 2012 to 2.89 in 2015 (Annual reports, 2012).http://Great BU7006 Strategic Management Sample
Mainly, current ratio is demonstrated through the ratio between current assets and liabilities which indicates the financial capability of business has improved over time.
On the other hand, quick ratio has described the comparison of short term liabilities and assets for indicating the liquidating ability of business in inventory.
The quick ratio of the business has reduced to -384.4 million in 2017 which has been rectified by 1976.2 million in 2018 (Sports directly, 2018).http://Great BU7006 Strategic Management Sample
Moreover, the investment ratio has also been reduced from 16, 19,681 million in 2016 to 2024.4 million in 2018.
Evaluation of developments in Sports Direct and retail sector by reviewing the stakeholder situation
The financial ratios of the business has indicated the growth which is clearly reflected in profit generation and significant growth in retail sector has also been identified in the span of March, 2018.
The significant development for the firm has been demonstrated through exploring the possibilities of commercial supply chain arrangements with the subsidiary of Findel Plc.
The firm have issues share of 29.7% as direct and indirect holdings for continuing their financial growth of business.
Sports Direct has hold the interest of Goals Soccer Plc. By 18.9% for their allocated capital. On the other hand, the business has issued 27% of capital volume in French Connection Group Plc.
which is followed by partnering with Eastern Mountain Stored and Bob Stories that are operators of USA retail chain.
The policies related to earnings per share for the firm has been rectified for considering the concern of both the business and shareholders.
The employees of the business are provided proper training and assistance for regulating their continuous work process without facing any issues.
Moreover, enhancing the performance of employees also increases the productivity of business by controlling the operational cost and resource application (Besler, Driblets, Seem, & Zimmermann, 2016).http://Great BU7006 Strategic Management Sample
Providing proper motivation, inspiration and staff empowerment also help to increase the skills and attributes for the workers which is beneficial for both the company and employees.
The perspective of shareholders are also maintained for continuing their cash flow which process continuous business operation (Finkle, Smith, & Calabrese, 2018).http://Great BU7006 Strategic Management Sample
The business has also introduced organizational development program for delivering the growth opportunities of employees’ career through accomplishing business goal.
The firm have to regulate with the legislation of Modern Slavery Act (2015) which has ensured the cultivation of equal opportunities for the staff within company management (Legislation, 2015).http://Great BU7006 Strategic Management Sample
Sports Direct has also created policies and procedures for regulating the regular work process which has concentrated the health and safety concern of employees.
The main stakeholders of the business are considered as suppliers, employees, customers and investors or shareholders.
Improving the brand image of the business has assisted the business to be acceptable for all the businesses.
The operational cost for the business function has been increased which has indicated lack of monitoring of the process and approving the quality of the product (Coleman, Coati, & Farhat, 2016).http://Great BU7006 Strategic Management Sample
The most influential stakeholders are considered as investors and shareholders who have provided financial resources for continuing the business process.
Moreover, the suppliers also played very crucial role for setting the price or cost associated with the final product.
Customers are attracted through offering different category of discounts, offers and promotions for getting attention of most of the citizens (McKinney, 2015).
The policies and procedures for the shareholders has need to be changed with relation to the external environment of business.
The profit generation has also been planned with sufficient financial resources which assist the business to continue their regular process.
Interpretation of challenges and opportunities for the foreseeable future of the business including financial and non-financial components
The challenges and opportunities for business has been addressed in the preliminary stage for accomplishing business goal without facing any issues.
The foreseeable future of the business has been demonstrated through financial and non-financial components and the challenges has been addressed through the aspects.
As stated earlier, the firm faced serious issues related to policies of shareholders which has increased the operational cost. Sports Direct has accumulated £ 1,807 million in 2012 that increased to £ 3359 million in 2018 (Sports directly, 2018).http://Great BU7006 Strategic Management Sample
Despite having internal problems, the firm was able to manage the gaining of market share in global field.
The profit generation of the firm has increased by 1.85% yearly and increasing the figure has been indicated as the enhanced business capability. But, if the profit generation before taxation has been considered, the gross margin has reduced due to higher operational cost (Sports directly, 2018).http://Great BU7006 Strategic Management Sample
As the profit before tax for the firm has been reduced from 281 in 2017 to 77 in 2018.
The managerial body of business had faced serious issues related to conflict for undertaking suitable decisions.
It has become very tough for the business to enhance the profit margin by normalizing the financial position. So, it is included as the primary challenge for the business (Potter, Pennock, Tarnowski, & Wright, 2019).http://Great BU7006 Strategic Management Sample
The policies related to earnings per share for the firm has been rectified for considering the concern of both the business and shareholders.
The earnings per share for the business has reduced drastically which is considered as the serious concern for the shareholders and authority.
The earnings per share has reduced from 39.4 in 2017 to 4.6 in 2018 (Annual reports, 2012).http://Great BU7006 Strategic Management Sample
It indicates the failure of the firm for distributing dividends to the shareholders for retaining their position.
So, it is considered as a crucial challenge for the business which is to be overcame.
As the firm is dealing with delivering sports equipment, wide range of companies has offered same service which reflects high number of competitors operating in same sector.
Famous global brands such as Nike, Adidas have sold quality and long-lasting products which has considered as the challenge for creating own brand image.
The strategic decisions of business has been undertaken for competing with the brands through satisfying customers (Finkle, Smith, & Calabrese, 2018).http://Great BU7006 Strategic Management Sample
The demands and needs of customers are evaluated for inclining the product or service into that direction which help to retain their old consumers and attract the new ones.
Due to the proposal of implementation of BREXIT, the rate of taxation policies for the products and raw ingredients would be changed which has affected the final cost for the products.
The tariff rate rises by 28% as estimated which indicates the requirement of strategic decisions for reduction in operational cost
The disposable income of UK citizens are high which is demonstrated from the economic stability of the country as the growth of GDP has been reflected.
It is considered as an opportunity for the business to deliver quality products in reasonable range. Most of the customers have preferred the products which are of high quality without prioritizing the price or cost for the product (Banerjee, 2015).http://Great BU7006 Strategic Management Sample
As most of the individuals are proficient in dealing with internet browser and social media platforms, digital promotion is considered as a unique way for spreading the product range to the wide range of customers.
It help to enhance the range of customer base for the business which is demonstrated as an opportunity (Coleman, Coati, & Farhat, 2016).http://Great BU7006 Strategic Management Sample
From the financial analysis, it has been interpreted that the volume of current assets of the business has been increased from £ 1,132,179 million in 2012 to £ 2,860 million in 2018.
On the other hand, the liabilities of businesses has reduced significantly which indicates the capabilities for compensating the both short-term and long-term liabilities.
The total liabilities of businesses has been reduced by 0.86% per year which reflects the opportunity for expanding their operations.
Conclusions
From the above study, it has been concluded that Sports Direct had gone through a tough situation due to the allegation of lack of assistance between the higher authorities which has caused complexity in business process.
The overall performance of the business is demonstrated through comparing the financial ratios with respect to past year.
After evaluation of the financial report of the business, it has been stated that the earnings per share has been lower due to compensating the short term liabilities and the gross profit margin is also reduced over years.
The revenue generation of business has increased gradually due to rising cost related to diversified equipment which also justifies the hike in operational profit and gross profit.
Enhancing the performance of employees also increases the productivity of business by controlling the operational cost and resource application.
Providing proper motivation, inspiration and staff empowerment also help to increase the skills and attributes for the workers which is beneficial for both the company and employees.
Modern Slavery Act (2015) and other policies are also maintained sustainably for regulating the business process without facing any issues. Sports Direct has accumulated £ 1,807 million in 2012 that increased to £ 3359 million in 2018.
Despite having internal problems, the firm was able to manage the gaining of market share in global field.
As most of the individuals are proficient in dealing with internet browser and social media platforms, digital promotion is considered as a unique way for gaining concern of most of the customers.
Most of the customers have preferred the products which are of high quality without prioritizing the price or cost for the product. These are considered as the opportunities which are to be utilized.
References
Annualreports. (2012). AnnualReportArchive. Retrieved August 5, 2019, from http://www.annualreports.com/HostedData/AnnualReportArchive/s/LSE_SPD_2012.pdf
Banerjee, B. (2015). Fundamentals of financial management. London: PHI Learning Pvt. Ltd.
Barr, M., & McClellan, G. (2018). Budgets and financial management in higher education. London: John Wiley & Sons.
Bessler, W., Drobetz, W., Seim, M., & Zimmermann, J. (2016). Equity issues and stock repurchases of initial public offerings. European Financial Management, 1(22), 31-62.
Coleman, S., Cotei, C., & Farhat, J. (2016). The debt-equity financing decisions of US startup firms. Journal of Economics and Finance, 1(40), 105-126.
Eskerod, P., & Jepsen, A. (2016). Project stakeholder management. London: Routledge.
Finkler, S., Smith, D., & Calabrese, T. (2018). Financial management for public, health, and not-for-profit organizations (1 ed.). London: CQ Press.
Kimmel, P., Weygandt, J., Kieso, D., & Trenholm, B. ( 2016). Financial Accounting. London: Wiley Custom Learning Solutions.
Legislation. (2015). Modern Slavery Act 2015. Retrieved August 5, 2019, from http://www.legislation.gov.uk/ukpga/2015/30/contents/enacted
McKinney, J. (2015). Effective financial management in public and nonprofit agencies (1 ed.). London: ABC-CLIO.
Mirror. (2018). Breaking-mike-ashleys-sports-direct. Retrieved August 5, 2019, from https://www.mirror.co.uk/news/uk-news/breaking-mike-ashleys-sports-direct-13060361
Potter, B., Pinnuck, M., Tanewski, G., & Wright, S. (2019). Keeping it private: financial reporting by large proprietary companies in Australia. Accounting & Finance, 1(59), 87-113.
Sportsdirectplc. (2017). Reports-and-presentations. Retrieved August 5, 2019, from https://www.sportsdirectplc.com/investor-relations/reports-and-presentations/rp-2017.aspx
Sportsdirectplc. (2018). Reports-and-presentations. Retrieved August 5, 2019, from https://www.sportsdirectplc.com/investor-relations/reports-and-presentations/rp-2019.aspx
Zietlow, J., Hankin, J., Seidner, A., & O’Brien, T. (2018). Financial management for nonprofit organizations: policies and practices. London: John Wiley & Sons.
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