Financial accounting Essay Example | Topics and Well Written Essays - 1750 words

Financial accounting - Essay Example Marks and Spencer’s well established business attracts a great deal of consumer base irrespective of demography. The primary business of the company comprises of selling general merchandise which mainly consists of womenswear. menswear and an expanding kids wear. The company, through its resilient and effective marketing tactics, has able to capture market share of around 11.0% by value and 11.2% by volume. Another source from where the company earns a great deal of its revenue is through selling food items. Marks and Spencer is the leading provider when it comes to selling fine quality food. The company sells everything from fresh meals to canned food items, highly acclaimed and praised range of wines to other groceries products. The company has improved its shelf availability and has adopted the strategy of renewing its food range. The proactive approach has resulted in an increase of 1.8% in sales revenue from food business. The financial year 2010 proved to be another prog ressive year for Marks and Spencer. During the current year, Marks and Spencer’s revenue increased by 5.2% during the current year to an impressive ?9.5 billion which has caused the operating profit to increase by 9.8%. The company, following its growth strategy, aspires transform its operation into multi channel business. The company has taken major steps in investing its direct sales business which enhanced the revenue by 27% during the current financial year. In addition, the company is actively following its strategy of refurbishing its stores and giving them a new and improved look. The refurbishment has resulted in an increased storage space and has created a fashionable shopping environment. The following table compares the financial results of Marks and Spencer, for the financial year 2010 with that of the year 2009. As quite evident from the above comparison, the financial outlook of the company has improved. The increase in group revenue primarily pertains to the in crease in like-for-like sales as well as the addition of new stores and outlets, both in and outside of England. Since Marks and Spencer do a significant number of its sales overseas, the company’s revenue is majorly increased due to the fluctuation in exchange rate. Although the recent credit crisis and global economic meltdown proved to be a hurdle, but the impact was offset by prudent risk management and apt allocation of capital investment. The gross profit to sales ratio for the year ended December 31, 2010 was 8.93% which has decreased by 0.67% during the current year. Despite the decrease in gross profit to sales ratio, the net profit of the company has increased by ?16.2 million. The increase in net profit is due to the fact that during the current year the company did not spend any exceptional cost which it incurred during the prior year on strategic restructure. In addition, the company took strong measures to control its finance cost during the current year and cur tailed it by ?52.3 million. An analysis of balance sheet of Marks and Spencer highlights the fact that during the current year the company’s non-current liabilities, in terms of borrowings from banks and other financial institutions, was comparatively less than the previous year. The fact that Marks and Spencer curtailed its borrowings highlight the fact that the company is focusing on gearing is business through raising capital by issuance of share capital, rather than acquiring capital from financers. The earnings per share (EPS) of