MASTERS IN BUSINESS ADMINISTRATION
Financial Statement Analysis on ESPRIT HOLDINGS LTD
By: Zahoor Soomro
1. 2. 3. 4.
Executive Summary Company Profile Introduction A framework for Evaluating Company Main Ratios (Table)
1 2 3 3 3 4 4 5 5 6 6 7 7 7 7 8 8 8 9 9 10 10 11 11 12 13 14
Profitability Ratios 5.1 Return on shareholders funds (ROSF) 5.2 Return On Capital Employed 5.3 Gross profit Margin Ratios 5.4 Net Profit Ratio
Efficiency Ratios 6.1 The average stock turnover 6.2 Average settlement period for receivables 6.3 The sales to capital employed 6.4 Average Payment Period
The average stock turnover in year 2007 has gone down and indicates more in and out of the business. The company’s liquidity ratios depict the upward trend which is favourable trend. This shows the excellent level of the liquidity available in the company. The Esprit does not have any long term liabilities since 2005 therefore the Gearing Ratio is not applicable over this period of time.
The investment ratio shows strongly favourable outcomes for the company. This shows upward trend in the Earning per Share, the dividend payout ratios and price earning ratios. These ratios attract the traders to invest in the business. More the investor invest in the business more the liquidity rise and more the income for operations become available.
The success of Esprit can be measured through significant financial information of the company that is available in the financial reports. These numerical have, mostly the positive trends in the business operations.
University of East London1 Zahoor Soomro
Esprit Ratio Analysis
2. Company Profile
ESPRIT is a youthful Lifestyle brand which offers fashion and new style apparels, footwear, jewellery, house wares etc which was established in 1968 and has its headquarters in Hong Kong. ESPRIT does the business under the group ESPRIT HOLDINGS LIMITED. The group is engaged in production and distribution (wholesale and retail) of high quality and affordable products under its globally renowned ESPRIT brand and also cosmetics and other body care products under its RED EARTH Brand. The group operates in more than 40 countries directly controlling more than 660 retail stores and over 13,000 controlled space wholesale point-of-sales internationally.(ESPRIT Annual report 06/07). On April 2006, Forbes recognised ESPRIT as one of the World’s 2000 largest Public companies. (DeCarlo, S.2006).
University of East London2 Zahoor Soomro
Esprit Ratio Analysis 3. Introduction
To gauge the performance of any company requires the careful understanding of the financial information provided in the financial statements. This information can be a matter of interest for the stakeholders in many ways. The most important is the buying and selling of the company’s shares. The ratio analysis provide the careful numerical to judge the profitability, efficiency, liquidity, gearing and success of financial investment of the company.
4. A Frame work for Evaluating Company
Assessing the company creates unique modelling opportunities and challenges. When deciding to acquire the company, one has to carefully analyse the strengths and weaknesses of the company on the numerical backgrounds. To understand the company’s risks is very crucial before the actual decision being made.
Main Ratios Ratio Analysis
Gross Profit Net Profit Return on Capital Employed
Earnings per share Price /...