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Hi, need to submit a 2000 words essay on the topic Marks and Spencer PLC financial performance- answer 3 questions.See Table A below in relation to Appendices A, B, C and A-1.It may be noted that retu
Hi, need to submit a 2000 words essay on the topic Marks and Spencer PLC financial performance- answer 3 questions.
See Table A below in relation to Appendices A, B, C and A-1.
It may be noted that return on equity uses the formula where net profit is divided by the total stockholders’ equity. When compared to an average rate of 0.50% if money was invested in a bank, its average ROE of 35% makes it to more than a seventy times and the rate is something very remarkable to find for investors.
The 0.50% is the Bank of England base rate could represent the risk free rate investment in the UK (Housepricecrash, 2011).
Aside from profitability, it is also appealing to know whether the company management is efficient. To measure the latter, this paper uses return on assets (ROA). The company’s average ROA of 9% for the last six years was higher than industry average of 1.6%. GAP appeared to have higher average ROA but ROE is more controlling from the point of view of investors (Van Horne, 1992). By comparing the two ratios, it appears that MKS is both profitable and efficient than industry.
The understandable profitability and efficiency of the company is further proved by the company’s net operating margin and net profit margin. The resulting average operating margin and average net profit margins for the past six years are 11% and 7% respectively as against the industry averages of 2.02% and 1.13% respectively. Operating margin results after deducting cost of sales or services and operating expenses from gross margin (Helfert, 2001)
MKS’s net margin for the latest twelve-month period was posted at 5.7% as against industry average of 0.23%. See Table A. If the rate is compared the operating profit margin, it could be found that net profit margin is lower. This means that MKS needed to spend other expenses to finance some of its borrowing. It further means that MKS is using other people’s money while improving profitability for
