Introduction Of Finance Strategy RESIT Public Limited company analysis
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The overall study is conducted to understand the key concepts of financial ratio analysis in which investor perspective is taken for the analysis. During the study financial ratios are calculated for Profitability Liquidity Efficiency, Gearing and Investor so that investors can understand broadly each factor that can influence financial performance as well as portfolio performance for the investor. Further, Recommendations are provided based on financial ratio analysis which can be adaptable for the investor if other factors are constant in the market. Here study suggested that investors should not rely wholly on the results of the study as there are many others factors are exist which can influence the performance of the company.
Financial Analysis of Company
- Profitability ratios – Profitability ratios can be the tool that helps in recognizing performance for the company (Otekunrin et. Al., 2018). This is the most vital ratio for the investor as they are mostly attracted toward profitability ratio which helps them in better assessment of the financial performance of the company.
- Margin Profit on sales –Margin profit on sales is the ratio that helps in the understanding of the relation between total sales on operating profit. As per the analysis Table, 1.1 AG Barr plc had 16% of operating profit on sales in 2020 and 17% in 2019 which indicates the constant performance of the company. In Britvic plcthe same ratio had 8% of operating profit in 2020 and 11% in 2019 which represent a downfall in the operating performance of the company.
- Return on capital employed – ROC Reflects the return which an investor can earn or achieved through their investment in the company for a fiscal year in which analysis is conducted (Wang et al., 2020). Here Britvic Plc had a ROC of 52% in 2020 and 55% in 2019 which indicates a downfall in overall return on capital employed for the company. For AG Barr Plc Return on capital employed is 26 % in 2020 and 25% in 2019 which again reflect stability in return for the company
- Liquidity Ratios–Liquidity ratios are used to analyze the cash and cash equivalents capabilities of the company which can help to get the liquidity strength of the company (Madushanka et. Al., 2018) . This ratio helps the investor to get to know about the short-term position or working capital management of the company for their current liabilities.
- Quick ratio – Quick ratio is a financial ratio that assists to identify the overall capabilities of quick's assets to meet up current liabilities of the company (Bunker et. Al., 2019) . Here as per Table 1.1, AG Barr Plc had a quick ratio of 1: 1.29 in 2020 and 1: 1.23 in 2019 which suggest Conformability of the Company in managing their current liabilities. As a competitor, Britvic Plc had a quick ratio of 1: 0.67 in 2020 and 1:0.72 in 2019 which suggests not a good image of the company in front of an investor.
- Current ratio – Current ratio defines the capability of current assets to set current liabilities and obligations for the company. As per the analysis conducted in table 1.1, AG Barr PLC had a current ratio of 1:1.62 in 2020 and 1:1.55 in 2019. Another hand Britvic PLC's current ratio of 1:0.87 in 2020 and 1:0.93 in 2019.
- Efficiency Ratio – Efficiency ratio is the financial rate of which help management and investor to identify the effectiveness for efficiency of production activities of the company which can help identify profit maximization of company. This ratio discusses the operational capabilities of the company-specific fiscal year.
- Stock Turnover Period – The stock turnover ratio helps management to identify the overall stock rotation period in which they can rotate their inventory or the inventory is rotated in a fiscal year. As per the analysis AG Barr PLC taken 46 days of stock rotation for 2020 add 43 days in 2019 where Britvic PLC take 71 days in stock rotation for 2020 and 76 days in 2019 which indicates a decline in PLC and growth in AG Barr Plc in the stock turnover period.
- Debtor turnover period –Debtor turnover period indicates the cover of rotations of data for the company which helps management to identify their credit policies and expected period in which they can recover their debtors. Here for 2020 AG Barr Plc taken 134 days for rotation of their debtors and Britvic Plc taken 178 days respectively.
- Gearing Ratios – The gearing ratio can be helpful and better identify of overall leverage operating profit of the company. Furthermore, this ratio also helps in represent the relation between owners' funds and debt funds so that investors can identify the overall debt funding charges which companies need to bear for their business activities.
- Gearing ratio – The gearing ratio is used to understand the relation between fixed interest liability and owners' capital fund for the investor (Martínez?Victoria et. Al., 2018). The gearing ratio reflects 1:2.47 in 2020 for Britvic Plc and 1:2.81 in 2019. When it comes to AG Barr Plc company had 1:1.13 for 2020 and 1:1.11 for 2019 which is favorable for an investor to invest in their fund.
- Interest coverage ratio – The interest coverage ratio defines the overall coverage of interest upon it for the company for a specific fiscal period. AG Barr plc 91 times more EBIT as compared to interest charging 2020 and 53.30 in 2019 which indicates the company improves their debt funding in capital structure. For Britvic Plc company had 10.34 in 2020 and 9.67 in 2019 which indicates small growth in profitability of the company.
- Investor Ratio– Investor ratios are the key ratio which used by the investor or attracts investor for investment their fund in the shares of the company. These ratios are highly influenced ratios that can impact the decision of investors for the investment of their funds for a specific business.
- Earnings Per Share – Earning per share is the ratio that helps the investor to identify the earnings for Persia which day acquired from the company in near future for a specific fiscal year (SUTHAR, K., 2018). as per the analysis, AG Barr PLC provides 31.51 % of earnings to the shareholders on holding of 1st year in 2020 wherein 2019 company provide 32.25% which is higher than 2020. When it comes to Britvic PLC Company provide 56.3% of the earning to the shareholders for each shareholding in 2019 and 2020 company increased the ratio by 59.8 % net earnings for each shareholding.
- Dividend Per Share – Dividend Per Share indicates the amount of dividend which the company declared per shareholding of the investor. This ratio help to identify the overall requirements from the net earning to shareholders for a fiscal year (Sondakh, R., 2019). DPS for AG Barr PLC 2020 is 15.74% which is less than last year (17.90). Britvic PLC company provide 27.1 9% of their earnings 2 to their shareholders as a dividend in 2019 and 2020 they increased the dividend payment ratio UP to 28.5% for their earnings on Per share.
Recommendation as per the Analysis
- As per the analysis conducted on the aspect of profitability, the study suggested that investor should invest their fund in Britvic PLC as the company had a high return on capital employed which provide feature profitability to the investor on their investment in the company.
- As per the analysis of liquidity status of the companies for 2019 and 20 state that investor should invest their fund in AG Barr PLC which can better handling of their current liabilities against quick assets and current assets for a specific year. As per the liquidity ratio, AG Barr Plc controls their fund and is also so not liquidated on an immediate basis for the current liabilities requirement.
- Analysis of efficiency ratio study suggested that had a lower stock turnover period and data turnover period which provide benefits of high consumption of raw materials and quick recovery of their credit receivables in the market. These facts can be suggested that investors should investor point in PLC which can provide them higher returns and overall better efficiency as compared to Britvic PLC.
- The gearing ratio assists that investor should invest their fund in AG Barr PLC where they have a lower gearing ratio and also EBIT is very much high on their interest charges so that company can easily set off their finance cost and make a high profit for their stakeholders.
- As per investor ratio, AG Barr PLC provides lower returns to their shareholders where Britvic PLC provides a high return as compared to AG Barr PLC in 2019 as well as 2020. Furthermore, Britvic PLC indicates growth in their returns or dividends which they provide to their shareholders so the study suggested that Britvic PLC can be a good option for investment.
The overall study is suggested that Investor should invest their fund in AG Barr PLC which can provide them high returns and better wealth maximization. Although Company had a lower rate of earnings and dividend payout their operational efficiency and profitability are very good than Britvic Plc for FY 2019. & FY 2020
This study overall provides a better analysis of the financial statement of AG Barr Plc and Britvic PLC for FY 2019 and 2020 for the investment of an investor. Overall Study conducted for the suggestion to an investor for their investment decision in between two companies which provide through comparison analysis through financial ratios for FY 2019 & 2020 along with competitors. Furthermore In this study Financial ratios are analyzed on Profitability, Efficiency, Liquidity, Gearing, and Investor perspective which provide a broad understanding of key factors and facts which can influence the decision-making process of investors for their investment fund.
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- Martínez?Victoria, M., ArcasLario, N. and Maté Sánchez Val, M., 2018. Financial behavior of cooperatives and investor?owned firms: An empirical analysis of the Spanish fruit and vegetable sector. Agribusiness, 34(2), pp.456-471.
- Wang, P., Ma, J.C., Jiang, Z.Q., Zhou, W.X. and Sornette, D., 2020. Comparative analysis of layered structures in empirical investor networks and cellphone communication networks. EPJ Data Science, 9(1), p.11.
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