United Parcel Service
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NEXT PLC Financial Analysis
Liquidity ratio
From 2003-05 there has been increase in 46% in current ratio and 51.9% increase in acid ratio. Even though in 2003 the current ratio was less than 1 but it was more than 0.80. Hence, we can assume than company has done pretty well. The following two years it managed to keep its ratio above 1.However generally ratio between 1.5 and 2 is treated as a safe margin since the company will have enough assets to pay its liability. Because the ratio is high, the chance of getting short term loans increase.
Efficiency Ratio
In terms of efficiency ratio NEXT PLC is doing well since there has been increase in the productivity of its employees. Furthermore, sales to capital employed ratio has also been increased .in other word the capital employed in NEXT is fetching more money in terms of sales.
Gearing Ratio
In terms of gearing ratio has done pretty well because it has been able to reduce the ratiofrom0.24% to 0.18% i.e. A reduction of 0.06% .The lower gearing ratio NEXT has the lesser the company is considered risky.
Profitability ratio
In terms of net profit margin company has shown steady upward trend we can interpret that NEXT is generating returns from its operations. However there has been a slight fluctuation in return on capital employed nevertheless its on the safer side since its well above the 20%.Profitability ratio indicates that NEXT if efficient and effective in generating profits
Investment Ratio
Investment ratio is better analysis when it is compared to other company in same industry. But still we can say that NEXT is providing a good return to its shareholders.
From 2004 to 05 there has been an increase of 26% and overall [2003-05] an increase of 72.48%. Thus NEXT is doing well in terms of giving more money back to its shareholder.
Conclusion
After analysing the financial statements of NEXT for past 3 year we can conclude by saying that the NEXT performance in past have been good and investing in a next will be a wise decision.
CALCULATIONS
PROFITABILITY RATIO
1] Profitability on Capital Employed= Net profit before Interest and Tax * 100
Share Capital+ Reserve+ Long term liability
2] Net Profit Margin = Net profit before Interest and Tax * 100
Sales
2003 N.P.M = 301.5/2202.6*100 =13.68
N.P.M=370.6/2516*100 =14.70
N.P.M= 441/2858.5*100=15.42
EFFECIENCY RATIO
A] Sales/Employee = SALES
No of Employee
S.P.E = 2202.6/31075+11000=0.52
S.P.E=2516/31075+11000=0.59
S.P.E=2858.5/31075+11000=0.67
B] Sales To Capital Employed =Sales/long-Term Capital Employed
S.T.C.E=2202.6/1493.6=1.47
S.T.C.E=2516/1846.1=1.36
S.T.C.E=2858.5/1931.4=1.48