Morrisons supermarket - financial report - page 7
Keywords: Morrisons,Finanial report,supermarket,performance of morrisons
By maya on 02/05/2008
Level: Master's degree (MA, MBA, MSc, MEng, MRes, MPhil etc)
Page Number: 7 of 14 pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14
been in generating sales revenue. The a bit higher asset turnover ratio of Morrison’s (i.e. 3.07 on 10 years average) normally suggests that the capital is being used a bit more productively in the generation of revenue.
Stock control involves careful planning and management within organization. A company must avoid typing too much capital in stock, yet the stock levels must always be sufficient to meet customer demand. Supermarket normally generates relatively high Stock turnover due to its nature, which stocks account for a proportion of the total assets held. Morrison’s performs well as it generates relative low and stable stock turnover (i.e. 27 days on ten year average) in maintaining relative lower but sufficient stock level.
Debtor collection period measures how quickly a company collects its debts from debtors. The shorter, the better. Domestic operation of the organization, Morrison’s has obvious short debtor collection period, namely around 3 days, which suggests that it takes short time for the company to collect debts.
Credit payment period measures how quickly a company pays its debts to its creditors. The longer, the better. Morrison’s has a relative long credit payment period, around 35 days for average settlement, which provides the organization capital flexibility to some extent.
Above historical record reveals Morrison’s performance from the view of efficiency and indicates that its logistic management works considerable effectively.
3.2.3. Liquidity
Table 4
Source: FAME
The current ratio represents the extent to which short-term assets are available to meet short-term liabilities. The Acid test ratio specifies the company’s ability to repay immediate commitments using cash or near-cash. It excludes the value of stock in order to show the immediate solvency of the company. Higher liquidity ratios are desired. And Morrison’s liquidity ratio increasing tend, except FY2004, implies the business is running at a stable liquidity statue. The ratio reveals that the assets cover liabilities at a standard rate. This is possible because Morrison’s holds fast-moving stocks of finished goods and generated mostly cash sales. The upwards tendency will provide the Group potential to pursue better liquidity capacity.
3.2.4. Gearing
Table 5
Source: FAME
The gearing ratio stands for the proportion of capital employed that is accounted for by long-term fixed interest debt. It indicates the financial structure of a business.
Shareholders of Morrison would be happy with Morrison’s extremely low gearing ratio which undulates at the benchmark of 10 in its prior years. In FY2003 Morrison’s gearing ratio falls to 8.64% indicating that
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