The paper "Burberry Company Quality of Corporate Governance" is a great example of a case study on management. Financial performance is the measure of how well a company uses its assets to generate revenues. It is also a measure of a company’ s overall financial health over a specified period of time and can also be used to compare similar companies across the same industry (Lee. T. 2007). Financial ratios will be used to measure the financial performance of Burberry Company. Liquidity RatiosCurrent ratioThey measure the ability of a company to turn its assets into cash.
They include the current ratio and quick ratio. Current ratio = Total Current AssetsTotal current liabilitiesFinancial Year31-Mar-1031-Mar-0931-Mar-0831-Mar-07Current Ratio1139.6536.1=2.2: 11125.7581.5= 1.9: 1953.2495.3= 1.9:1749.7396.9= 1.9:1Burberry Company's current ratio is greater than the acceptable levels of 1:1. This means that the company has enough assets to make payment for its debts and it, therefore, has a high financial performance. The financial performance of the company seems to increase on a yearly basis form 1.9: 1 in 2007 to 2.2:1 in 2010. This means that the company has sufficient assets to be able to cater to its liabilities in case a need arises in the future. Quick RatioIt is also known as the acid-test.
This ratio expresses a company’ s ability to repay its short-term creditors from its liquid assets. It also shows the number of times the quick assets cover short-term liabilities. Ratios greater than 1 mean that the short-term liabilities are fully covered. Quick ratio = Current assets – InventoryCurrent liabilitiesFinancial Year31-Mar-1031-Mar-0931-Mar-0831-Mar-07Quick Ratio767 - 166.9 702= 0.85742.4 – 262.6709.2= 0.68588.4 -268.6436.2= 0.73423.7 – 149.8330.4= 0.82The quick ratio of Burberry Company for the four years ranges from 0.68 to 0.85 which means that the company’ s short-term liabilities are not fully covered.
The ratio decreased from 0.82 in 2007 to 0.68 in 2009 and later increased to 0.85 in 2010. Burberry Company has a quick ratio of less than 1 which means that it is incapable of catering or covering its liabilities fully. The finances of the company are therefore not able to cater to the liabilities hence not performing well (Richard Bull, 2008).
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