M&S Ratio Analysis

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1. INTRODUCTION: This report aims to analyse the performance of the Marks and Spencer Group using some financial and non-financial indicators and to compare its corporate governance structure with that of a rival company, Waitrose Supermarkets. It also highlights some financial instruments multinational corporations use in managing foreign exchange risk. Company profile: Marks and Spencer (M&S) Group The M&S Group are one of the UK’s leading retailers that offer a range of high quality products and services such as clothing, home products and food services.The Group employs over 75,000 people and has 520 UK stores and an expanding international business in Asia and the Middle East (marksandspencer.com, 2007). Waitrose Supermarkets: The John Lewis PartnershipWaitrose Limited operates nearly 185 Waitrose supermarkets in London, southern England, the Midlands, East Anglia, and Wales it was acquired in 1937 by John Lewis Partnership, one of the UK's largest retailers. The supermarket deals in fresh foods, clothing and house-ware (waitrose.com, 2007). TABLE SHOWING THE FINANCIAL RATIO ANALYSIS FOR MARKS AND SPENCER GROUP. PROFITABILITY RATIOS unit 2007 2006 2005 Return on capital employed (ROCE) % 27.7 26.2 16.5 Return on shareholders' funds (ROSF) % 46 49 31 Net Profit Margin (NPM) % 12 10.9 8 Gross Profit Margin (GPM) % 38.9 38.3 35 EFFICIENCY RATIOS Average stock turnover period days 27 27 26 Sales revenue to capital employed times 2.3 2.4 2.1 Sales revenue per employee £ 113,193 110,904 106,172 LIQUIDITY RATIOS Operating cash flows to maturing obligation times 0.8 0.5 1.2 Current ratio times 0.5 0.6 0.7 Quick (Acid Test) ratio times 0.26 0.38 0.4 Gearing ratio % 56 64 75 Interest cover ratio times 9.3 6 4.9 INVESTMENT RATIO Dividend payout ratio % 39 39 41 Earnings per share (EPS)

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