Ratio Analysis Is Where Financial Ratios Are Calculated From The Information Given Accounting Essay

Greggs, is one of the top bakeshop retail merchant in the UK, it has been working for the last 70 old ages, and more than 1400 stores are being operated across UK. Greggs have 375 bringing vehicles, and about 19000 employees. Greggs are be aftering to add about 600 more stores and looking farther to add 6000 more occupations.

Greggs staffs are extremely skilled, they have 289 Master Bakers, and approximately of 2,254 combined old ages of experience in baking field. Greggs bakeshops manus finish 1000000s of material each hebdomad, particularly frosting, to manus writhing their yum yum rings and manus traversing their hot cross buttockss. Greggs believe that they are different because they make and bake chiefly of their ain nutrient from abrasion, their ‘wheat to eat ‘ proposition. Greggs work force are passionate about baking and take great pride in their nutrient. Each merchandise is vigilantly prepared to give their consumers excellence and freshness at huge worth monetary values.

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Kennedy McMeiken was nominated as company head executive on August, 1st 2008. Kennedy was retail manager of J Sainsbury plc. Kennedy had spent around 14 old ages in operations with on Tesco every bit good. Richard Hutton working as a finance manager at Greggs. He has career experience with Procter & A ; Gamble before he joined Greggs in 2006.

Bacon axial rotations have given a addition to returns at bakeshop groupA Greggs, and the company is now adding crescent rolls. Harmonizing to Greggs, entire gross revenues for the 39 hebdomads to the start of October had climbed by 2.6 % , with like for like gross revenues up 0.5 % , in malice of the unsmooth trading conditions. Like many other concerns, retail and non retail, it cautioned the hard environment was likely to go on, with consumer disbursement go oning to be constrained and inflationary force per unit areas constructing. The recent hapless conditions has severely damaged concern ofA Greggs, the High Street bakeshop concatenation.

Ratio Analysis

In histories, Ratio analysis is where fiscal ratios are calculated from the information given in the company ‘s fiscal statements. By analyzing a company ‘s fiscal ratios it can give a individual an first-class image of the public presentation of the company. Different sets of ratios are used to construe different sides of the company ‘s public presentation and in this study we will see this. The fiscal analysis of a company is normally done under three classs of ratios and these are fiscal ratios, investing ratios and public presentation ratios.

Performance ratios

We will now look at the public presentation ratios of Greggs, the underlining factor of these ratios is sing profitableness.

Tax return on Capital employed ( ROCE )

Year to January 2008

Net income before revenue enhancement and involvement 45.152m 45.152m

— — — — — — — — — — — — — — — — — — — — A-100 % i?? — — — — — — — — — -A-100 % = — — — — — – = 26 %

Entire assets less current liabilities 250.4 -73.9m 176.4m

Year to January 2007

Net income before revenue enhancement and involvement 49.0m 49.0m

— — — — — — — — — — — — — — — — — — — — A-100 % i?? — — — — — — — — — -A-100 % = — — — — — – = 30 %

Entire assets less current liabilities 238.2 -77.1m 161.1m

ROCE is the cardinal ratio and if merely one ratio were to be calculated so this would be it. This ratio measures how expeditiously the assets are used to bring forth net income. As we can see the per centum in 2008 was 26 % which was lower than the old twelvemonth of 30 % . This reflects severely for the company because it shows that it has non grown over the twelvemonth. The company has non performed good in the fiscal twelvemonth and this may be off seting for possible investors who may come in and want to do the company even bigger.

Asset turnover

Year to January 2008

Gross ( or gross revenues ) 628.2m 628.2m

— — — — — — — — — — — — — — — — — — — — i?? — — — — — — — — — — — — = — — — — — — = 3.5

Entire assets less current liabilities 250.4 -73.9m 176.4m

Year to January 2007

Gross ( or gross revenues ) 586.3m 586.3m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — — — — = — — — — — — = 3.6

Entire assets less current liabilities 238.2 -77.1m 161.1m

This ratio is used to mensurate how expeditiously the assets are being used to bring forth gross revenues. When it comes to this ratio, the higher the figure the better. Again we can see from the ratio above the figure was higher in 2007 than 2008 and this once more suggests that the company under performed in 2008 in comparing of the old twelvemonth, something the company will be concerned about.

Net Net income Margin

Year to January 2008

Net income before revenue enhancement and involvement 45.152m 45.152m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — — — A-100 % = — — — — — – =7.1 %

Gross ( or gross revenues ) 628.2m 628.2m

Year to January 2007

Net income before revenue enhancement and involvement 49.0m 49.0m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — — — — A-100 % = — — — — — — =8.3 %

Gross ( or gross revenues ) 586.3m 586.3m

This ratio measures how efficient the gross revenues are in bring forthing net incomes. By ciphering the ratios we can see that the per centum has dropped by merely under 1 % from 2007 and 2008. This suggests once more that the public presentation degrees have decreased for Greggs over the last twelvemonth and this is damaging for the company.

Gross Profit Margin

Year to March 2008

Gross Net income 387.9 m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — – A-100 % i??61.7 %

Gross ( or gross revenues ) 628.2 m

Year to March 2007

Gross Net income 365.4 m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — – A-100 % i?? 62.3 %

Gross ( or gross revenues ) 586.3m

Gross net income is the difference between what the traded goods cost to purchase and what the company has sold them for. The higher the gross net income border the better it is for the company. From Greggs figures we can see that in 2007 the gross net income border was 62.3 % and in 2008 it went to 61.7 % . This shows that the gross net income border was lower in 2008 compared to 2007 and this means that the company made less money in 2008. This will be refering for Greggs.

Inventories ( Or Stock ) Employee turnover

Year to March 2008

Inventories ( or stock ) A-365 12.1m A-365 4416.5m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — i?? — — — — — — — – = 18 yearss

Cost of gross revenues 240.2m ( 240.2 ) m

Year to March 2007

Inventories ( or stock ) A-365 9.9m A-365 3613.5m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — i?? — — — — — — — – = 16 yearss

Cost of gross revenues 220.8m ( 220.8 ) m

This ratio measures the figure of yearss the stocks take to turn-over. The above figures show that in 2007 it took 16 yearss for the stocks to turnover whereas in 2008 it takes 2 yearss longer and the stock turnover is 18 yearss. The quicker the goods are sold the more money is brought into the company and even thought the alteration is minimum over the twelvemonth it will still hold an consequence on Greggs.

Trade Receivables ( Or trade debitors ) Employee turnover

Year to March 2008

Trade receivables ( or debitors ) A-365 22.6m A-365 8249m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — i?? — — — — — — — – = 13.1 yearss

Gross ( or gross revenues ) 628.2m 628.2m

Year to March 2007

Trade receivables ( or debitors ) A-365 19.9m A-365 7263.5m

— — — — — — — — — — — — — — — — — — — — — -i?? — — — — — — — — i?? — — — — — — — – = 12.3 yearss

Gross ( or gross revenues ) 586.3m 586.3m

This ratio measures the mean period of clip in yearss that recognition clients take to pay. We can see that in 2007 it was 12.3 yearss and in 2008 it is 13.1 yearss. This suggests that in 2008 people are taking longer to pay off their debts in comparing to 2007 and this is bad for the company. The quicker Greggs roll up its debts the quicker the company will turn.

Year to March 2008

Trade payables ( or creditors ) A-365 62.7m A-365 22885.5m

— — — — — — — — — — — — — — — — — — — — — – i?? — — — — — — — -i?? — — — — — — = 95.2 yearss

Cost of gross revenues 240.2m ( 240.2 ) m

Year to March 2007

Trade payables ( or creditors ) A-365 68.1m A-365 20732m

— — — — — — — — — — — — — — — — — — — — — – i?? — — — — — — — -i?? — — — — — — = 93.8 yearss

Cost of gross revenues 220.8m ( 220.8 ) m

This ratio measures the mean length of clip in yearss that a company takes to pay its ain providers. The above ratio shows that in 2007 it took Greggs 93.8 yearss to pay it providers and in 2008 it took Greggs 95.2 yearss. This is non a good mark for Greggs because if Greggs is unable to pay its providers on clip so there is a hazard they may lose that provider and that would be really damaging for the company.

Investing Ratios

Net incomes per portion

Year to March 2008

EPS: 336.7

Year to March 2007

EPS: 342.8

This ratio measures the net incomes, for illustration net incomes which are attributable to each ordinary portion. The consequences from the above ratio show that EPS decreased from 342.8p to 336.7p from 2007 to 2008. The higher this ratio is means the higher the company net incomes are for the twelvemonth. So we can see that the company net incomes suffered in 2008 compared to 2007 because the EPS is lower.

Price Net incomes Ratio.

March 2008 – Pe 11.6

Price net incomes ratio is the market monetary value of the ordinary portion divided by the EPS. If the PE is high so the market expects the company to turn whereas if the PE is low so the market does n’t anticipate the company to turn.

Dividend Output

March 2008 – 3.8 %

The dividend output is measured by the dividend per ordinary portion divided by the market monetary value per ordinary portion.

Dividend Cover

Year to March 2008

Net income on ordinary activities after revenue enhancement 45.1m

— — — — — — — — — — — — — — — — — — — — — — — — — = — — — — — — — — – = 0.30

Ordinary ( equity ) dividends 147.9m

Year to March 2007

Net income on ordinary activities after revenue enhancement 49.4m

— — — — — — — — — — — — — — — — — — — — — — — — — = — — — — — — — — – = 0.33

Ordinary ( equity ) dividends 145.5m

The dividend screen measures how much of the net incomes have been paid out as a dividend.

Tax return on Equity ( ROE )

Year to March 2008

Net income on ordinary activities after revenue enhancement 45.1m

— — — — — — — — — — — — — — — — — — — — — — — — — — = — — — — — — – = 3.34 %

Equity stockholders ‘ financess 13.5m

Year to March 2007

Net income on ordinary activities after revenue enhancement 49.4m

— — — — — — — — — — — — — — — — — — — — — — — — — — = — — — — — — – = 3.65 %

Equity stockholders ‘ financess 13.5m

The ROE measures the return on the capital employed from the position of the ordinary portion holder.

Fiscal Status Ratios

Working capital Ratio

Year to March 2008

Current assets 39.2m

— — — — — — — — — — — — — – = — — — — — — – = 0.53

Current liabilities 73.9m

Year to March 2007

Current assets 41.4m

— — — — — — — — — — — — — = — — — — — — – = 0.53

Current liabilities 77.1m

This ratio is the chief liquidness ratio. If the ratio is less than one so the company has a negative on the job capital and this is the instance with Greggs. This means that they will non be able to cover short term payments which are really refering for Greggs. We can see that the consequence is the same for both old ages.

Quick Assetss Ratio

Year to March 2008

Current assetsi??Inventories 39.2 – 12.1 27.1

— — — — — — — — — — — — — — — — — — – = — — — — — — — — — — – = — — — — — – =0.36

Current liabilities 73.9 73.9

Year to March 2007

Current assetsi??Inventories 41.4 – 9.9 31.5m

— — — — — — — — — — — — — — — — — — – = — — — — — — — — — — = — — — — — — — =0.40

Current liabilities 77.1 77.1m

This ratio is an alternate liquidness step.

Gearing

Year to March 2008

Long-run Debt + penchant portions 2.4 + 0 2.4

— — — — — — — — — — — — — — — — — — — — — — = — — — — — — — — — – = — — — — — — X 100 = 1.35 %

Entire Assets less Current Liabilitiess 250.4 – 73.9 176.5

Year to March 2007

Long-run Debt + penchant portions 2.4 + 0 2.4

— — — — — — — — — — — — — — — — — — — — — — = — — — — — — — — — — — = — — — — — — -X 100= 1.4 %

Entire Assets less Current Liabilitiess 238.2 – 77.1 161.1

This is the balance sheet step of solvency. Gearing expresses the proportions of the funding of the concern that derives from borrowing, as opposed to equity portion capital.

Interest Screen

Year to March 2008

Net income before revenue enhancement and involvement 45.152m

— — — — — — — — — — — — — — — — — — — — – = — — — — — — — — — — — — = 5.50

Interest collectible 8.2m

Year to March 2007

Net income before revenue enhancement and involvement 49m

— — — — — — — — — — — — — — — — — — — — — — = — — — — — — — — — — – = 115.0

Interest collectible 0.426m

This is the net income and loss step of insolvency.

Decision

This study consists of the computations of the fiscal studies of Greggs in 2007 and 2008. By analyzing the cardinal figures we can see that Greggs has gone downhill from 2007 and 2008. We can see that the return on capital employed has decreased which is a major factor for the company. The company ‘s gross net income border has besides decreased which is deemed really of import for the company aswell.