The paper 'Copplice Plc Is a Good Investment Avenue for Manchester Money Universal Plc " is a perfect example of a finance and accounting case study. Copplice Plc is a UK based hotel chain which provides low-cost hotels to people and has developed numerous stores all around the UK. The company has also adopted the slogan of “ No Frills Nice Bills” to match its business model and has ensured customer satisfaction enhances. The report thereby looks to present the financial analysis of Copplice Plc by looking into ratios from 2009 to 2011 so that Manchester Money Universal Plc which is an investment bank can decide whether acquiring 20% of the company’ s share is beneficial or not. Financial Analysis Financial information by them doesn’ t highlight anything but evaluated against different parameters helps businesses to decide the future course of action as it helps to understand whether investing in the company is profitable or not (Financial Ratios, 2011).
Following is the financial analysis for Copplice Plc Profitability Ratios These ratios help to understand whether the business has been able to generate profits from its daily operations and helps investors and stakeholders to understand the future earning capacity.
The ratios are Return on Total Assets: This ratio helps to determine the manner in which assets have been used in generating profits. The ratio is as RATIOS FORMULAS 2011 2010 2009 ROTA PBIT / (TOTAL ASSETS-INTANGIBLE)* 100 126 / (1111 - 100) * 100 = 12.46% 123 / (1182-100) * 100 = 11.37% 98 / (1022-100) * 100 = 10.63% The ratio shows that Copplice Plc has been able to use its assets better in 2011 as compared in 2010 and 2009 thereby showing efficiency in the use of assets.
Along with it, Copplice Plc has been able to ensure that profits also increase which is matched by an increase in asset base. Net Profit Margin: This ratio helps the shareholders to understand the final profit that attributes to them and is calculated after all the expenses associated with the normal functioning of the business have been met. The ratio is as RATIOS FORMULAS 2011 2010 2009 NET PROFIT MARGIN PBIT / SALES * 100 126 / 354 * 100 = 35.59% 123/366 * 100 = 33.61% 98 / 320 * 100 = 30.63% The ratio shows that Copplice Plc has been able to control the cost so that the bottom line grows.
The financial figure shows that sales have decreased in 2011 but Copplice Plc has been able to reduce its expenses which have increased profits and ensured better returns for the shareholders. Gross Profit Margin: This ratio helps to identify the profits after the direct expenses have been met and help the business to make changes in the production process so that profits increases. The ratio is as RATIOS FORMULAS 2011 2010 2009 GROSS PROFIT MARGIN GROSS PROFIT / SALES * 100 207 / 354 * 100 = 58.48% 216 / 366 * 100 = 59.02% 192 / 320 * 100 = 60% The ratio shows consistency in the manufacturing process and highlights that 40% cost is incurred to provide services thereby highlighting efficiency in the process and the ability of the business to ensure reduced direct cost for all the years. Liquidity Ratios This ratio helps to understand the ability of the business to meet its short expenses out of the short term incomes thereby ensuring that the business is not engulfed in a liquidity trap.
The ratio is as Current Ratio: This ratio is of prime importance to lenders as it helps to understand the safety of funds and the ability of a business to meet its daily expenses (Gandy, 2011).
The ratio is as RATIOS FORMULAS 2011 2010 2009 CURRENT RATIO CURRENT ASSETS / CURRENT LIABILITIES 46 / 157 = 0.29 times 42 / 161 = 0.26 times 42 / 122 = 0.34 times The ratio shows low liquidity for Copplice Plc thereby increasing the risk for the short term lenders as the chances of the firm being unable to meet its daily expenses are high. Copplice Plc has 4 times short term liabilities compared to assets thereby increasing the likelihood of being entangled in a liquidity trap.
Financial Ratios. 2011. Financial Ratios. Retrieved on November 17, 2011 from http://www.zeromillion.com/business/financial/financial-ratio.html
Gandy, M. 2011. Is a low current ratio bad? Retrieved on November 17, 2011 from http://www.markgandycfo.com/2011/03/is-a-low-current-ratio-bad/
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