Financial Report: Next Plc Research Paper

Financial Report: Next Plc
A financial report of Next, a UK-based retail firm.
# 154208 | 2,746 words | 7 sources | 2015 | UA
Published on Aug 31, 2015 in Economics (Public Finance) , Economics (General)

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From the Paper:

"The debt ratio measures the financial leverage of the company by showing the amount of assets that the company should sell to pay off its liabilities. Although different industries have varying optimal debt ratio, a ratio of 0.5 (50 %) is considered to be reasonable (Goyal, 2012, p. 533). In the case of Next Plc, the debt ratios of 59 % and 52 % for 2012 and 2013 respectively, were above the optimum ratio, which means that the company can be considered risky, especially by lenders (Appendix 1). However, it is clear that the ratio was declining significantly.
"The debt-equity ratios of 2.95 and 1.99 for 2012 and 2013 respectively, are also above the required level of 1 (or at most 100 %) (Appendix 1). This means that Next Plc was financed by creditors than the owners, which is an undesirable gesture to potential investors. However, the ratio reduced significantly from 2012 and 2013, which means that the proportion of investor funds increased in relation to non-owners funds.
"Profitability ratio: ROCE estimates the efficiency with which a firm managed to utilize its long-term funds to increase shareholder returns. In the case of Next Plc, ROCE increased from 0.54 in 2012 to 0.61 in 2013, which shows that the company's profitability increased with time (Appendix 1). This increase in profitability has been attributed to the increase in online sales, new spaces, franchising and the introduction of great products (Next Plc, 2013, p. 10).
"The return on equity ratios of 2.13 and 1.78 for 2012 and 2013 respectively can be considered to be reasonable, but they are below the industry optimum ratio (Appendix 1). A ROE ratio of between 5 and 10 is a more appropriate indicator of the company's growth in terms of profit-generating capacity (Goyal, 2012, p. 529)."

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