15 Pages
3631Words
1: Introduction Of Financial Insights And Business Intelligence
This project will emphasize the commercial and fiscal expertise of the picked company, Amazon Plc. More data for this project will be distributed based on two crucial components, including the study of economic ratios and the simulation of the revenue statement. Ratio calculations according to earnings, liquidity, solvency, as well as effectiveness ratios must be carried out in order to take into account all relevant information about the economic evaluation.
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Detailed information about this project will be offered based on an extensive competitive assessment of the designated rivalries, Sainsbury's. On the basis of the statement of income modelling, which, in accordance with certain advised general suppositions may be used to classify nations, further specifics of this project will be explored. The successful completion of this job will also assist with the creation of a pertinent suggestion that will detail different ways in which ratio and financial requirements may be considerably improved in the near and distant destiny.
2: Part A: Ratio Calculations and Ratio Analysis&
2.1 Ratio Analysis
2.1.1 Profitability
| Amazon |
| Year |
Net Profit Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Net Profit |
(Net Profit/Sales)*100 |
&$ 2,371.00 |
1.74% |
1.68% |
| Sales |
&$ 1,35,987.00 |
| 2015 |
Net Profit |
&$ 596.00 |
0.06% |
| Sales |
&$ 10,07,006.00 |
| 2014 |
Net Profit |
&$ -241.00 |
-0.27% |
0.33% |
| Sales |
&$ 88,988.00 |
| Year |
Gross Profit Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Gross Profit |
(Gross Profit/Sales)*100 |
&$ 47,722.00 |
35.09% |
-57.69% |
| Sales |
&$ 1,35,987.00 |
| 2015 |
Gross Profit |
&$ 9,34,355.00 |
92.79% |
| Sales |
&$ 10,07,006.00 |
| 2014 |
Gross Profit |
&$ 26,236.00 |
29.48% |
63.30% |
| Sales |
&$ 88,988.00 |
| Sainsbury |
| Year |
Gross Profit Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Gross Profit |
(Gross Profit/Sales)*100 |
&$ 2,196.00 |
6.19% |
1.11% |
| Sales |
&$ 35,452.00 |
| 2015 |
Gross Profit |
&$ 1,949.00 |
5.08% |
| Sales |
&$ 38,356.00 |
| 2014 |
Gross Profit |
&$ 2,205.00 |
5.79% |
-0.71% |
| Sales |
&$ 38,072.00 |
| Year |
Net Profit Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Net Profit |
(Net Profit/Sales)*100 |
&$ 1,948.00 |
5.49% |
2.68% |
| Sales |
&$ 35,452.00 |
| 2015 |
Net Profit |
&$ 1,078.00 |
2.81% |
| Sales |
&$ 38,356.00 |
| 2014 |
Net Profit |
&$ 2,351.00 |
6.13% |
-3.32% |
| Sales |
&$ 38,356.00 |
Table 1: Computation of Profitability Ratios2.1.2 Liquidity
| Amazon |
| Year |
Current Ratio |
Formula |
Amount |
Ratio |
Growth |
| 2016 |
Current Assets |
(Current Assets /Current Liabilities) |
&$ 45,781.00 |
1.04 |
-0.01 |
| Current Liabilities |
&$ 43,816.00 |
| 2015 |
Current Assets |
&$ 35,705.00 |
1.05 |
| Current Liabilities |
&$ 33,887.00 |
| 2014 |
Current Assets |
&$ 31,327.00 |
1.12 |
-0.06 |
| Current Liabilities |
&$ 28,089.00 |
| Year |
Quick Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Current Assets- Inventories |
(Current Assets- Inventories /Current Liabilities) |
&$ 34,320.00 |
0.78 |
0.03 |
| Current Liabilities |
&$ 43,816.00 |
| 2015 |
Current Assets- Inventories |
&$ 25,462.00 |
0.75 |
| Current Liabilities |
&$ 33,887.00 |
| 2014 |
Current Assets- Inventories |
&$ 23,028.00 |
0.82 |
-0.07 |
| Current Liabilities |
&$ 28,089.00 |
| Sainsbury |
| Year |
Current Ratio |
Formula |
Amount |
Ratio |
Growth |
| 2016 |
Current Assets |
(Current Assets /Current Liabilities) |
&$ 67,50,000.00 |
0.68 |
0.08 |
| Current Liabilities |
&$ 98,68,000.00 |
| 2015 |
Current Assets |
&$ 70,73,000.00 |
0.60 |
| Current Liabilities |
&$ 1,17,17,000.00 |
| 2014 |
Current Assets |
&$ 7,58,000.00 |
0.61 |
0.00 |
| Current Liabilities |
&$ 12,47,000.00 |
| Year |
Quick Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Current Assets- Inventories |
(Current Assets- Inventories /Current Liabilities) |
&$ 49,53,000.00 |
0.50 |
0.04 |
| Current Liabilities |
&$ 98,68,000.00 |
| 2015 |
Current Assets- Inventories |
&$ 54,48,000.00 |
0.46 |
| Current Liabilities |
&$ 1,17,17,000.00 |
| 2014 |
Current Assets- Inventories |
&$ -9,74,000.00 |
-0.78 |
1.25 |
| Current Liabilities |
&$ 12,47,000.00 |
Table 2: Computation of Liquidity Ratios 2.2.3 Solvency
| Amazon |
| Year |
Debt To Equity Ratio |
Formula |
Amount |
Ratio |
Growth |
| 2016 |
Debt |
(Debt /Equity) |
&$ 7,694.00 |
0.40 |
-0.22 |
| Equity |
&$ 19,285.00 |
| 2015 |
Debt |
&$ 8,227.00 |
0.61 |
| Equity |
&$ 13,384.00 |
| 2014 |
Debt |
&$ 8,265.00 |
0.77 |
-0.15 |
| Equity |
&$ 10,741.00 |
| Year |
Debt To Total Assets Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Debt |
(Debt /Total Assets) |
&$ 7,694.00 |
0.09 |
-0.03 |
| Total Assets |
&$ 83,402.00 |
| 2015 |
Debt |
&$ 8,227.00 |
0.13 |
| Total Assets |
&$ 64,747.00 |
| 2014 |
Debt |
&$ 8,265.00 |
0.15 |
| Total Assets |
&$ 54,505.00 |
| Sainsbury |
| Year |
Debt To Equity Ratio |
Formula |
Amount |
Ratio |
Growth |
| 2016 |
Debt |
(Debt /Equity) |
&$ 3,303.00 |
0.04 |
-0.01 |
| Equity |
&$ 84,230.00 |
| 2015 |
Debt |
&$ 4,043.00 |
0.05 |
| Equity |
&$ 82,756.00 |
| 2014 |
Debt |
&$ 3,577.00 |
0.05 |
0.00 |
| Equity |
&$ 79,172.00 |
| Year |
Debt To Total Assets Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Debt |
(Debt /Total Assets) |
&$ 3,303.00 |
0.13 |
-0.03 |
| Total Assets |
&$ 26,294.00 |
| 2015 |
Debt |
&$ 4,043.00 |
0.15 |
| Total Assets |
&$ 26,679.00 |
| 2014 |
Debt |
&$ 3,577.00 |
0.14 |
0.02 |
| Total Assets |
&$ 26,294.00 |
Table 3: Computation of Solvency Ratios2.2.4 Efficiency
| Amazon |
| Year |
Asset Turnover Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Sales |
(Sales /Total Assets) |
&$ 1,35,987.00 |
1.63 |
-13.92 |
| Total Assets |
&$ 83,402.00 |
| 2015 |
Sales |
&$ 10,07,006.00 |
15.55 |
| Total Assets |
&$ 64,747.00 |
| 2014 |
Sales |
&$ 88,988.00 |
1.63 |
13.92 |
| Total Assets |
&$ 54,505.00 |
| Year |
Inventory Turnover Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Cost of Sales |
(Cost of Sales /Average Inventory) |
&$ 88,265.00 |
8.13 |
0.30 |
| Average Inventory |
&$ 10,852.00 |
| 2015 |
Cost of Sales |
&$ 72,651.00 |
7.84 |
| Average Inventory |
&$ 9,271.00 |
| 2014 |
Cost of Sales |
&$ 62,752.00 |
7.53 |
0.31 |
| Average Inventory |
&$ 8,334.00 |
| Sainsbury |
| Year |
Inventory Turnover Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Cost of Sales |
(Cost of Sales /Average Inventory) |
&$ 33,453.00 |
0.53 |
0.52 |
| Average Inventory |
&$ 62,752.00 |
| 2015 |
Cost of Sales |
&$ 29,413.00 |
0.02 |
| Average Inventory |
&$ 16,78,500.00 |
| 2014 |
Cost of Sales |
&$ 35,453.00 |
0.04 |
-0.02 |
| Average Inventory |
&$ 8,82,226.50 |
| Year |
Asset Turnover Ratio |
Formula |
&Amount |
Ratio |
Growth |
| 2016 |
Sales |
(Sales /Total Assets) |
&$ 62,453.00 |
2.44 |
0.14 |
| Total Assets |
&$ 25,599.00 |
| 2015 |
Sales |
&$ 61,458.00 |
2.30 |
| Total Assets |
&$ 26,679.00 |
| 2014 |
Sales |
&$ 65,453.00 |
2.49 |
-0.19 |
| Total Assets |
&$ 26,294.00 |
Table 4: Computation of Efficiency Ratios
2.2 Comparative analysis
2.2.1 Profitability
Comparative analysis between Amazon and Sainsbury PLC has to indicate Sainsbury PLC net profitability margin is positive compared to Amazon PLC. The identification of net and gross profit margins has defined the continuous progression of business activity by Amazon PLC providing excellent growth in GP margin compared to NP margin. Sainsbury PLC has been informed about positive growth in net profit margin due to continuous growth in revenue volume (sainsburys.co.uk, 2023). Profitability identified gross profit margin growth of Amazon PLC is higher than Sainsbury PLC which indicates the organization is struggling with managing expenses of operational activities.
2.2.2 Liquidity
Based on the analysis, Amazon PLC's performance in current ratio management is continuously sustainable and has been effective to gain an advantage in future business operations. Sainsbury PLC's performance has been identified as stable in the current ratio due to current assets volume growth being positive. The liquidity ratio of both organizations has presented Information about the continuous progression in business activity with the growth of current assets which has been considered as current liabilities management activities (Jayakrishnan et al. 2018). Additional information has defined positive growth in financial year 2016 by 0.04. Consideration of both prospects to evaluate financial stability for managing debts is defined as Amazon PLC having better financial flexibility.
2.2.3 Solvency
The Solvency ratio of Amazon and Sainsbury PLC has identified continuous progression of business activity based on debt to equity ratio. The debt to equity ratio of Amazon PLC indicates negative growth in the financial year 2016 and 2016 -0.22 and -0.15. Whereas Sainsbury PLC's performance has been continuously progressive due to excessive equity financing has been adopted compared to debt financing. Using debt to total asset ratio defines an organizational approach toward optimization of total assets volume which has been evaluated by Amazon PLC's performance regarding Optimisation is better than Sainsbury PLC due to total assets volume increased by business operations (Boži? and Dimovski, 2019). Performance-wise, Amazon PLC outperforms Sainsbury PLC. Because of efficient management practices, Amazon PLC's performance is superior to Sainsbury PLC, as evidenced by the assets turnover ratio, which also shows that the organization's capacity for total asset optimization is continuously expanding.
2.2.4 Efficiency
Inventory turnover ratio identified continuous growth in Sainsbury PLC compared to Amazon PLC that indicates consumption of inventory holding is being evaluated as growth in profitability volume. Additional information regarding asset turnover ratio provided Information Amazon PLC's performance is higher than Sainsbury PLC's. The assets turnover ratio identified both organizational abilities to optimization of total assets is continuously growing which has provided information regarding Amazon PLC's performance is better than Sainsbury PLC's because of effective management policies.
In comparison to Amazon PLC, Sainsbury PLC's inventory turnover ratio showed consistent growth, indicating that the consumption of inventory holdings is being interpreted as an increase in profitability volume. Additional details about the asset turnover ratio are provided to define better future opportunities for Amazon PLC. As a result, the main counsel offered for the improvement in revenue statement modelling may be taken into consideration with regard to observing worldwide economic parameters such as inflation and GDP. Since it often needs to take into account the inclusion of multiple accounting elements, creating the statement of earnings modelling is regarded as a difficult task.
3: Part B: Income Statement Modelling
3.1: Generic Assumptions
Charges and other charges are predicted to rise in 2017 at a pace of 6% compared with 2016. When contrasted with the costs and liabilities incurred in the course of 2017, it will be expected that costs as well as appropriate expenses would increase by 5% in 2018. Compared to the gross sales obtained for the year 2017, selling profits in 2018 is expected to go up at an annualized rate of 5% and the sales revenues are forecast to rise 6% larger in 2017 than they did in 2016.
3.2: The Modelling
| Amazon Inc (All figures in Millions) |
| Particulars |
2016 |
2015 |
2014 |
2017 |
2018 |
| Net product Sales |
94,665 |
79,268 |
70,080 |
99398.25 |
83231.4 |
| Net service Sales |
41,322 |
27,738 |
18,908 |
43388.1 |
29124.9 |
| Total net sales |
1,35,987 |
1,07,006 |
88,988 |
142786.35 |
112356.3 |
| Operating expenses |
| Cost of sales |
88,265 |
72,651 |
62,752 |
93560.9 |
77010.06 |
| Fulfilment |
17,619 |
13,410 |
10,766 |
18676.14 |
14214.6 |
| Marketing |
7,233 |
5,254 |
4,332 |
7666.98 |
5569.24 |
| Technology and content |
16,085 |
12,540 |
9,275 |
17050.1 |
13292.4 |
| General and admin |
2,432 |
1,747 |
1,552 |
2577.92 |
1851.82 |
| Other operating expense |
167 |
171 |
133 |
177.02 |
181.26 |
| Total operating expense |
1,31,801 |
1,04,773 |
88,810 |
139709.06 |
111059.38 |
| Operating income |
4,186 |
2,233 |
178 |
4437.16 |
2366.98 |
| Interest income |
100 |
50 |
39 |
106 |
53 |
| Interest expense |
-484 |
-459 |
-210 |
-513.04 |
-486.54 |
| Other income (expense) |
90 |
-256 |
-118 |
95.4 |
-271.36 |
| Total non operating income |
-294 |
-665 |
-289 |
-311.64 |
-704.9 |
| Income (loss) before income taxes |
3,892 |
1,568 |
-111 |
4125.52 |
1662.08 |
| Provision for Income taxes |
-1,425 |
-950 |
-167 |
-1510.5 |
-1007 |
| Equity method investment activity |
-96 |
-22 |
37 |
-101.76 |
-23.32 |
| Net income (loss) |
2,371 |
596 |
-241 |
9404.43 |
2885.86 |
Table 5: Preparation and Presentation of Income Statement Modelling
3.3: Improvements Advised
Several further changes might be accentuated: sticking to the sincere growth index in the not-too-distant future. As per the narration and explanation of (Jail and Hwang, 2019), since it often needs to take into account the addition of multiple revenue statement elements, producing an income statement simulation can be seen as a difficult task. In this way, more accurate quantitative translations that provide estimations of net profits that come in close to reality could potentially be made attainable through the financial statement model. As a result, the main recommendations offered for enhancing the quality of income account forecasting may be taken into consideration with regard to detecting worldwide economic parameters such as hyperinflation and GDP.
4: Conclusion and Recommendations
4.1: Conclusion
Based on the above discussion it can be concluded that the majority of company associations work to enhance the budgets of specific businesses and foster solid partnerships that are beneficial to the growth of their operations. Likewise, the solvency ratio of a business organization's net revenue is a helpful finance matrix that effectively identifies its overall debt through the course of a fiscal year. A large number of company groups strive for the greatest future needs and are successfully contrasting by ratio-based methodologies, in order to find ways to increase sustainable business performance.
4.2: Recommendations
Many company organizations have to figure out how they satisfy all of the debt commitments of the business in order to assess or enhance the economic condition of the organization. This is required to identify the monetary framework of the business. The ratios of finances must be compared to the business's historic fiscal health in order to manage the company's short-term and long-term debt responsibilities.
References
- Ahmad, S., Miskon, S., Alabdan, R. and Tlili, I., 2020. Towards sustainable textile and apparel industry: Exploring the role of business intelligence systems in the era of industry 4.0. Sustainability, 12(7), p.2632.
- Boži?, K. and Dimovski, V., 2019. Business intelligence and analytics for value creation: The role of absorptive capacity. International journal of information management, 46, pp.93-103.
- Boži?, K. and Dimovski, V., 2019. Business intelligence and analytics use, innovation ambidexterity, and firm performance: A dynamic capabilities perspective. The Journal of Strategic Information Systems, 28(4), p.101578.
- Hu, Y., Xu, A., Hong, Y., Gal, D., Sinha, V. and Akkiraju, R., 2019. Generating business intelligence through social media analytics: Measuring brand personality with consumer-, employee-, and firm-generated content. Journal of Management Information Systems, 36(3), pp.893-930.
- Jalil, N.A. and Hwang, H.J., 2019. Technological-centric business intelligence: Critical success factors. International Journal of Innovation, Creativity and Change, 5(2), p.1499.
- Jayakrishnan, M., Mohamad, A., Azmi, F. and Abdullah, A., 2018. Implementation of business intelligence framework for Malaysian halal food manufacturing industry towards initiate strategic financial performance management. Management Science Letters, 8(10), pp.1059-1076.
Website
- sainsburys.co.uk, 2023, Competetor. Available at: https://about.sainsburys.co.uk/investors/results-reports-and-presentations/results-reports-and-presentations/2022 [Accessed on: 20th April, 2023]
