Contents

Introduction................................................................................................................................1
Task 1.........................................................................................................................................2
P1.1: Sources of finance available to the business chosen.....................................................2
P.1.2: Implications of the different sources of finance to the business chosen.......................3
P1.3: Selection of appropriate sources of finance available to the business chosen..............4
Task 2.........................................................................................................................................7
P2.1: Analysis of costs & costs of different sources of finance.............................................7
P2.2: Importance of financial planning to the business chosen..............................................9
P2.3: Information needs of different decision makers in the business chosen......................9
P2.4: Impact of finance on the financial statements of the business chosen.......................10
Task-3.......................................................................................................................................12
P3.1: Analysis of budgets & making of appropriate decisions based on the given case:.....12
P3.2: Explanation of the unit costs and making of pricing decision....................................13
P3.3: Evaluation of the viability of the project given by using investment appraisal
techniques.............................................................................................................................15
Task 4.......................................................................................................................................17
P4.1: Discussion on the basic form and purpose of main financial statements...................17
P4.2: Comparison among formats of financial statements of different types of business..18
P4.3: Interpretation of financial statements using ratios of given companies and comparison
of financial performance of these two company..................................................................19
Conclusion................................................................................................................................22

Introduction
In this competitive job market people are jobless. Further, many people are losing their job by
serious economic recession. So start-up a business is the best solution to this ongoing
problem. To start a new business, one needs money to get it off the ground. One needs fund to
purchase or rent space, to purchase equipment, supplies etc. One also needs fund to pay
employees, start up production or servicing. Can everyone afford all of these costs? Probably
one cannot, but one can afford these by proper financing from several sources. But first to
consider that which type of financing sources is best for the various business regarding their
cost and feasibility.

Task 1
Business plan: starting a restaurant
Location: 26 Maddox Street, London.
Form of ownership: Partnership [3 partners].
Objectives: the primary goal is to operate the service and strive to satisfy the customer needs.
Then positioning in the local catering market.
Activities: retail and home delivery of products
Capital required: 500,000

P1.1: Sources of finance available to the business

chosen
Financing is required to start-up a business and run it up. There are varied sources of finance
to be considered when start-up business. But the sources varied based on the necessity and
quantity of capital required.
Generally, equity financing and debt financing is the major sources of start up financing. But
there are two more options too and these are leasing and government grants etc.
Equity financing is the way to finance a business by exchanging the share or exchanging
the part ownership. The part owner gets some value for being stakeholder or taking some
risks.
There are various kinds of equity financing:
1.
2.
3.
4.
5.
6.
7.
8.

personal savings
Home equity loans
Friends and relatives
Venture capital
Angel Investors
Equity offerings
Initial public offerings
Warrants

Debt financing means financing a business by borrowing funds or taking loans with the
stipulation of repaying the borrowed amount with interest. Debt financing includes:
1. Friends and relatives
2. Banks
3. Bonds
4. Bank overdraft
5. Suppliers
6. Debentures
7. Commercial finance companies etc.

 Leasing is a financing method by which a business can use machinery of others without
purchasing in exchange for a rental value.
As the business plan is a partnership, all of the sources are not opened for financing the
business and also all other sources opened are not feasible regarding their cost.
In this business planned all the sources mentioned below are available:
Equity financing:
1. Personal savings
2. Home equity loans
3. Friends and relatives
4. Venture capital
5. Angel Investors
Debt financing:
1. Friends and relatives
2. Banks
3. Bank overdrafts
4. Suppliers
5. Commercial finance companies etc.
Leasing

P.1.2: Implications of the different sources of finance to

the business chosen
Legal implications of the different sources of finance to the chosen business:
Equity financing:
1. Initial public offerings & Equity offerings:
In case of equity financing the legal implication to my chosen business is that the
business cannot raise capital by initial public offerings and equity offerings till it
turned to a public ltd. Company.
2. Home equity loans:
The legal implications with the home loans are that whether I have the possession
over the home or it mortgaged to another.
Debt financing:
In case of debt financing the legal implication is that I have to pay tax over the loan
borrowed and interest paid.

Financial implications of the different sources of finance:

 Equity financing:
In case of equity financing, the equity holders are part owner. So, they can get profit
over their investment.
Debt financing:
The lender of business is recognized as the debtors and entitled to get interest over
their lending money.
Dilution of control implications:
Bankruptcy implications:
If we very much depending on the debt financing there creates a possibility to be
bankrupt. for example if the chosen business finance most of its capital by
borrowing and after a certain time the borrowing amount cannot be met by its assets it
will be turned bankrupt.

P1.3: Selection of appropriate sources of finance

available to the business chosen
All the financing sources are not feasible in a particular business regarding the business size,
cost of the financed capital, time duration of the finance etc. So, the appropriate sources have
to be found out based on their advantages and disadvantages.
Equity financing:
Personal savings:
Advantages:
1. Usually financing from personal sources is interest free or though it is not, the
rate is very low.
2. The money dont have to be paid back on time
3. Can be used for long time, usually be used till the dissolution
Disadvantages:
1. Not in greater quantity
2. Causes serious cash flow problems if the owners need to get it back in a short
notice as it is the main sources of capital fund in any business held
Home Equity loans:
Advantages:
1. Adequate amount can be financed
2. Interest is fixed for the number of period
Disadvantages:

1. Causes risk to loss home for the failure of payment

2. Effects the decision
3. Have to pay more interest as the amount of borrow is usually higher than the
amount needed

Friends & relatives:

Advantages:
1. Best for short term capital
2. Increases of expertise
3. Repayment always need not be required when the business is proved bankrupt
Disadvantages:
1. Increases the number of partners
2. Influences decision

Venture Capital:
Advantage
1. Increases the expertise of professionals
2. Can be got the proper advice
3. Adequate amount
Disadvantage:
1. Increases the number of profit beneficiary
Angel investors:
Advantages:
1. efficiency of professionals
2. Sufficient amount
Disadvantages:
1. Increases number of partners which effect profit sharing.
Debt financing: all the debt financing sources are costly for their interest. More
reliability on these might lead the business to bankruptcy. But they have a benefit too as
debtors cannot gain profit and control over the business:
Bank loans:
Advantages:
1. Can be got quickly
2. Financing required amount
Disadvantages:

1. High interest
2. The lender can posses the property mortgaged if the borrower defaults in loan
payment.
Bank overdrafts:
Advantages:
1. Quick financing
2. Suitable for short term financing
Disadvantages:
1. High interest rate.
Leasing:
Advantages:
1. No extra cash money required
2. Gaining Possession of lease after lease period
3. Inflation friendly
Disadvantage:
1. Total lease money incurred is greater than purchasing price

Only equity financing is not better for an organization as by equity financing the investors get
some part ownership which effects profit sharing and control. Also, only debt financing is not
feasible cause the lender take high interest on the amount they owe. Furthermore extreme
debt financing leads to be bankrupt. So, it is wise to use both financing sources balancing on
them.
Regarding the mentioned advantages and disadvantages it seems the following options will
be appropriate:
Equity financing:
1. Personal savings
2. Venture capital
3. Angel investors
Debt financing:
1. Friends and relatives
2. Bank loans
3. Suppliers
Leasing

Task 2

P2.1: Analysis of costs & costs of different sources of

finance
Costs in financial terms is the costs, interests, any disbursements or charges involved in the
borrowing of money or raising up equity fund for start or run up a business.
The following is the cost of various sources of finance:

Equity financing:
Personal savings/ owners capital:
Costs:
Interests on investment. But it is also good for a business because the
interest is further invested in the business.
Home equity loans:
Costs:
Annually paid out interest
Applying for loans cost
Share capital:
Costs:
Cash dividend paid out
Bonus shares which maximizes the equity of external investors
To call up AGM
Disclosing financial reports
Share floatation
Venture Capital:
Costs:
Profit sharing every year
Angel investors:
Costs:

Profit share in every particular period

Equity offerings:
Costs
Cash dividend paid out
Issuing prospectus
Initial public offerings:
Costs:
Applying for the permission to stock exchange
Cash dividend paid out
Costs to brokerage house
Issuing prospectus
Floatation cost

 Debt financing:
Friends and relatives:
Costs:
Costs of interest
Cash flow deduction for repayment of Principal
Bank loan :
Costs:
Interest rate
Charges on applying for loan
Charges incurred due to non-payment of any installment
Cash shortage for repayment of loan
Probability of increase in interest rate due to recession
Bank overdraft:
Costs:
High interest rate
Cash shortage due to repayment of loan
Mortgage the property
Extra interest deducted if the limit is exceeded.
Goodwill required
Trade credit or suppliers:
Costs:
High amount paid than the cash purchasing.
No grant of discount
Damages for non payment
Leasing:
Costs:

Interest payable
Leasing costs exceeds purchasing costs
Goodwill required
Cash shortage for installment paid

P2.2: Importance of financial planning to the business

chosen
Financial planning is the estimation of capital requirements of a business, feasible sources of
financing, investment, dividend decisions. Actually it is an overall estimation of the financial
position of a company or business.
It provides an overall view of the future financial activities of a business organization.
Financial forecasting or planning is very much important in my chosen business as it is sets
the goal achievement strategies. The followings are the reasons:

To find out the feasible financing sources for the chosen business
To forecast the working and fixed capital needed

To gain an expected cash inflow to meet up the interest of the debtors

To gain an expected net income to give the angel investors, venture capitalist their
expected return
To maintain prices at a level to gain profit
To retain a portion of earnings
Helps to raise fund for future expansion
To reduce conflict about financial affairs
To clarify the all financial activities to all partners

P2.3: Information needs of different decision makers in

the business chosen
Information is the life blood for an organization. Various stakeholders make their decision
based on information.
Financial information is concerned with the information which represents the overall
financial activities of an organization. Such financial information is its net profit, debtorscreditors ratio, investment, financial position, retained earnings, dividends payment etc.
In an organization, there are many more stakeholders. They can be either internal or external.
In my chosen business there are many users or decision makers that needs information and
they are:
Internal users:
Managers
Partners
Copartners(angel investors, venture capitalist)
Employees

External users:
Bank authorities
Leaser
Suppliers
Customers
In case of company, tax authorities may include as external users. But as my chosen business
is partnership, there are no responsibilities to tax authorities. Angel investors and venture
capitalists as a part owner will be regarded as partner.
In my business, managers need information about operations and financial position
(debtors, creditors, capital, assets, cash etc.), profit during the year to set plan.
Partners need information about sale, revenues, expenditure, net income, financial
position to se business expansion or capital structuring plan.
Employees need information about revenues to make sure about the payment of their
compensation.

 Bank authorities need information about cash flow, debtors-creditors ratio, debtorscapital ratio to take decision whether they will grant loan and make sure the
repayment of loan and interest of granted money.
Leaser needs information about financial plan, financial position, net profit, cash flow.
Suppliers need information about cash flow, debtors turnover ratio, creditors
turnover ratio, debt equity ratio to make decision about sales on account.
Customers need information about products, sales etc. to make decision about
purchase.

P2.4: Impact of finance on the financial statements of

the business chosen
Financial statements represent the profit and loss, financial position, cash flow, owners
equity of a business organization. In case of company the financial statements have five
components. As my chosen business is a partnership organization, there are no share capitals
that have to pay dividend and tax liability to open Profit and Loss Appropriation Account
Partnership business financial statements have four components & these are following:
1.
2.
3.
4.

Profit and Loss Account

Balance Sheet
Cash Flow Account
Capital Account

Financing from various sources impacts financial statement as it causes change in cash flow,
capital account, financial position and sometimes financial profit and losses of an
organization.
The following table demonstrates how finance impacts the financial statements of my chosen
business organization:
A table showing how finance impact on the financial statements of the chosen business
Sources of
finance
Personal
savings/
partners
capital
Borrowing
from
friends and
relatives
Venture
capital

Profit & Loss

Account

May increase
expenditure(interest
on capital)
Causes
expenditure(interest)

May increase
expenditure(interest

Balance Sheet

Cash Flow
Account

Capital
Account

Increase the current

assets(cash); increase
the internal
liability(capital)

Increase the
cash
availability

Increase the
capital of
partner(individ
ual capital
column)

Increase the current

assets(cash); increase
the liability

Cause
available
cash

Increase the current

assets(cash); increase
the internal

Increase the
cash
availability

Increase the
capital of
partner(individ

Angel
investors

on capital)

liability(capital)

May increase
expenditure(interest
on capital)

inc Increase the

current assets(cash);
increase the internal
liability(capital)

Affect cash
by an
increase

Increase the current

asset(cash);
increase the short term
liability
Increase the current
asset(cash); increase
the current liability
Increase the current
asset(cash); increase
the current
liability(company)
Increase the current
liability

Increase the
cash
availability

Decrease a
asset(particular)increa
se another asset(cash)

Cause an
increase in
cash

Bank loans

Causes
expenditure(interest)

Bank
overdrafts

Increase
expenditure(interest)

Commercia
l finance
company

Affect
expenses(interest )
{increase}

Trade
credit or
suppliers
Sale of
assets

May increase either

expenses (loss) or
Income(profit from
sale)

ual capital
column)
Increase the
capital of
partner(individ
ual capital
column)

Increase
available
cash
Cause an
increase in
cash
availability

Task-3
P3.1: Analysis of budgets & making of appropriate decisions
based on the given case:
A budget is usually refers to a comprehensive and coordinated plan. In financial terms, a
budget is a designated form of planning for the operations and uses of financial resources of
an organization or enterprise for some specific period in the future.
The overall budget of an organization which is familiarly called the Master Budget includes
operating budget, financial budget and special decision budget.

Financial budget is concerned with the expected cash inflows/outflows, financial position,
results from operations for a specific period. Financial budget includes: 1. Budgeted income
statement. 2. Budgeted statement of retained earnings. 3. Cash budget. 4. Budgeted balance
sheet.
Budgeted income statement represents the future expected income of organization that helps
to deduct the expenses when the expenses too high.
Budgeted statement of retained earnings represents the portion of net income that is expected
to be retained in the future specific period.
Cash budget represents the expected cash inflows and outflows of upcoming period.
Budgeted balance sheet represents the expected financial position; future expected change in
assets, liabilities and stockholders equity.

Cash Budget
As at 31st Dec. 2013
Cash balance (1-12-2013)

(199,000)

Cash receipts

6,869,000

Cash payments
Cash balance (31-12-2013)

(7,462,000)
( 792,000)

Revising the cash flow forecast of the Easy electronics ltd. it is found that the cash flow 0f
this company is not satisfactory as it shows deficit balance. The cash receipts are more than
cash payment that can cause serious working capital problem. So, Easy electronics ltd. is
required to increase sales to increase cash inflow. Here, capital expenditure is higher. The
company should look up for alternative sources of finance as the as interest charge is higher.
It can also increase cash inflow by reducing variable costs.

P3.2: Explanation of the unit costs and making of pricing

decision
Unit cost is the summation of all variable and fixed cost. It includes manufacturing cost,
selling cost, administrative costs, overhead.
T otal cost
Unit cost = Total units produceds old

The calculation of unit costs in the given case demonstrated below:

Total cost

Unit costs = Total units producedsold

Salesrevenue net income
= total units p roducedsold

=
=
=

Sales revenue profit after tax

total units producedsold
35,830,000 7,697,000
650,036
28,133,000
650,036

= 43.28
In this case, the pricing proposal is to penetrate the market.
Feasibility of this strategy:
If selling price reduced by 10%
So, new selling price = 55.12

55.1210%)

= 55.12 5.512
= 49.608
As a result of reduced sell will be increased by 20%
New sales (unit) = 650,036 + (650,036 20%)
= 650,036 + 130,007
= 780,043
As an effect of reducing price the cost of sales will be increased by 20%
So, new cost of sales = 18,878,000+ (18,878,000 20%)
=18,878,000 + 3,775,600
=22,653,600

If selling price reduced by 20%, profit and loss account will be the following:

Profit and Loss Account

Amount
()

Amount
()

Sales (49.608 780043)

38,696,373

Less: cost of sales

(22,653,600)

Gross profit

16,309,773

Profit from disposal of equipment

100,000
16,409,773

Less: Expenses
Administrative cost

3,075,000

Distribution cost

3,481,000
(6,556,000)
9,853,773

Profit before tax and interest

(500,000)

Loan interest
9,353,773
Profit before tax
2,151,367
Less: tax @23%
7,202,406
Profit after tax

This profit and loss account show that this strategy is not feasible as the previous price
generates more profit than that of it.
So, it is wise to stay with the previous budgeted selling price.

P3.3: Evaluation of the viability of the project given by using

investment appraisal techniques
There are several investment appraisal techniques to evaluate the viability of a project.
Investment appraisal by ARR and payback period method:
1. ARR (Accounting Rate of Return ) method:

Particulars

Project A

Cost

8,000,000

Annual net cash flows :

1

2,000,000

2,800,000

3,200,000

1,200,000

800,000

500,000
10,500,000

Cumulative Cash flow

6 years

Estimated life of the project

Residual value

4,000,000

Average annual profits after taxes

100
investment
average
e lifeof the project
th

cumulative cash flow

Average annual income = life time of the project

10,500,000
6

= 1,750,000

ARR =

Average investment =

Initial cost+ Residual value

2
8,000,000+ 4,000,000
2

= 6,000,000

ARR=

1,750,000
10 0
6,000,000

= 29.17%
Accept-reject criterion: ARR method as an investment appraisal method suggests
qualifying the project when ARR is greater than minimum required rate or cut-off rate.

Since, the actual ARR 29.17% is higher than cut-off rate 10% the project is viable according
to this traditional ARR method.

2. NPV (Net Present Value) method:

year

Net cash flow or CFAT

PV factor (10%)

2,000,000

0.909

Present value of net

cash inflow
1,818,000

2,800,000

0.826

2,312,800

3,200,000

0.751

2,403,200

1,200,000

0.683

819,600

800,000

0.621

496,800

500,000

0.564

282,000

Total present value of net annual cash flow

Less: Initial investment
Net present value(NPV)

8,132,400
8,000,000
132,400

Accept reject criterion: NPV method suggests accepting the project if present value of
cash inflow is positive.
Hence, the project is viable.

Task 4
P4.1: Discussion on the basic form and purpose of main
financial statements
Financial statements of an organization represent the financial profit and loss, financial
position, retained earnings, cash flow, and owners equity of a business organization.
Financial statement of an organization comprises:

Income Statement or Profit & Loss Account

Statement of Retained Earnings or Profit and Loss Appropriation Account
Statement of Financial position or Balance Sheet
Statement of Cash Flow or Cash Flow Account
Statement of Owners Equity

Income Statement or Profit & Loss Account:

All types of income and expenditure during a particular period are shown up in this
account or statement. This financial statement measures companys financial
performance such as profit made or loss suffered in a particular period
Income expenditure = profit or loss
Statement of Retained Earnings or Profit and Loss Appropriation Account:
This statement represents the portion of net income that is retained for reinvestment of
the profit not paying it to shareholders as dividends.
It shows up the better position of a company that how well it operates and generates
profit. Also it is a matter of relief for the shareholders and creditors that the company
is in a better position.

Statement of Financial position or Balance Sheet:

Statement of financial position or balance sheet represents the financial position of an
organization at a given period. The basic motive to prepare is to know the change in
every particular or total assets, particular liabilities and total liabilities and change in
capital structure of a company or business organization. From external users stand
point it is information for the evaluation of a company or business. From the
managers or business owners standpoint it is information for financial planning.
The basic elements of a balance sheet are:
Assets= Liabilities + Owners Equity
Statement of Cash Flow or Cash Flow Account:

This statement or accounts represents the cash inflow and outflow of a certain period.
This statement serves a company to know where from the business receiving cash and
in what sources the cash is spending. Investors and creditors are known about the
solvency of business from this statement.
Statement of Owners Equity
It is a statement of owners equity in the business, its change during the year. The
basic motive to make it is to know the equity, drawings in a period.

P4.2: Comparison among formats of financial

statements of different types of business
Formats of financial statements vary regarding the types of business as different types of
business have different economic sectors, stakeholders and different level of necessity.
Income statement for sole proprietorship business is simple as it serves only the owner. Sole
proprietorship business does not require income statement and balance sheet. But in
comparison a company has to prepare comprehensive income statement as they have to show
taxable profit and balance sheet to compare the financial position with other companies.
In case of partnership business the profit and loss account have to prepare first as interests
and profits forward to partners capital account. Capital account should prepare second as the
balance will be the part of balance sheet.
In case of limited company the balance sheet must highlight the current and fixed assets,
liabilities, sales, profits, tax payable, retained earnings and earnings per share to provide
information about financial position and stability to the stakeholders.

P4.3: Interpretation of financial statements using ratios

of given companies and comparison of financial
performance of these two company
Ratios of different types of companies help them to compare the financial position with
previous years and the other companies. In this case study various ratios of WM Morrison
Supermarkets PLC and J Sainsbury PLC are given and the following is interpretation

Wm Morrison Supermarkets PLC vs. J Sainsbury PLC

Comparison of Financial performance for 2010:
Particulars

Turnover

EBT

WM
J
Morrison
Sainsbury
PLC (2010) PLC(2010
I6,479
21,102

874

Return on
Shareholders
Funds
Gross Margin

16.13%

EBIT Margin

5.49%

Profit Margin

5.30%

Berry Ratio

Return on
Capital
Employed
Return on
Total Assets

6.97%

Interpretation
J Sainsbury PLC generates better turnover
than WM Morrison PLC.

827 WM Morrison PLCs earning before tax is

better than J Sainsbury PLC.
15.25% WM Morrison provides more return on the
shareholders fund than that of J Sainsbury PLC.
5.50%

WM Morrison PLC has a better contribution

margin on sales.
4.03% WM Morrison PLC has a better Contribution
margin.
3.92% WM Morison generates better operating profit
margin

3.79

3.04

The standard of berry ratio is 1. This resulted

ratio indicates both companies making profit
above variable expenses. But WM Morrison
makes it better

12.44%

9.78%

WM Morrison gains better return on capital

employed in comparison with the J Sainsbury
PLC

9.59%

7.26% ROA of WM Morrison is better in comparison

with J Sainsbury PLC

Net Assets
Turnover

2.35

2.50 WM Morrison output better turnover than that

of J Sainsbury

Current Ratio

0.55

0.58 The standard for current ratio is 2:1. The given

ratio implies that current assets is too short
against liabilities

Liquidity
Ratio

0.24

Stock
Turnover

25.83

Debtor
Collection
Days
Creditors
payment days
Gearing%
Interest
Cover

4.36

31.01

29.61%
21.33

0.31 The standard for liquidity ratio is 1.5:1. The

given ratio implies that both companies have a
problem with liquidity. But WM Morrison
suffers it very much
25.99

J Sainsbury PLC generates little bit more

turnover on stocks

1.61 J Sainsbury collect debt within a short period

31.76

WM Morrison pay their creditor little bit more

frequently than that of J Sainsbury

57.28%
8.13 WM Morrison has more profit than their
interest payment

Earnings Per
Share
Dividends
per share

0.24

0.33 J Sainsbury earn more per share

0.08

0.14 J Sainsbury pay more dividend

Market
Capitalizatio
n
Total Assets

7,083

Working
Capital

-948

-1,221

The current liabilities of both companies are

higher against their current assets.

5,420

5,424

Shareholders fund of J Sainsbury is slightly

better

Shareholders
Funds

9,111

6,257 Market value of WM Morrison is greater than

that of J Sainsbury
11,399

Total assets of J Sainsbury are greater than WM

Morrison.

Comparison of Financial performance for 2011:

Particulars

Turnover

WM
J
Morrison
Sainsbury
PLC (2011) PLC(2011)
17,663
22,294

Interpretation
J Sainsbury PLC has a better turnover than
that of WM Morrison PLC.

EBT

947

Return on
Shareholders
Funds
Gross Margin

17.55%

EBIT Margin

5.51%

Profit Margin

5.36%

Berry Ratio

Return on
Capital
Employed
Return on
Total Assets

6.89%

799 WM Morrison PLC has better Earnings before

tax.
14.19% WM Morrison provides more return on the
shareholders fund than that of J Sainsbury PLC.
5.43%

WM Morrison PLC generates better

contribution margin.
3.92% WM Morrison PLCs Contribution margin is
better.
3.58% J Sainsbury generates better operating profit
margin

3.95

3.09

12.53%

8.68%

9.61%

The standard of berry ratio is 1. WM Morrison

generates more profit against variable expenses
WM Morrison gains better return on capital
employed in comparison with the J Sainsbury
PLC

6.47% ROA of WM Morrison is better in comparison

with J Sainsbury PLC

Net Assets
Turnover
Current Ratio

2.34

2.42 J Sainsbury output better turnover on net assets

0.57

0.65 The standard for current ratio is 2:1. The given

ratio implies that current assets is too short
against liabilities

Liquidity
Ratio

0.24

0.35 The standard for liquidity ratio is 1.5:1. The

given ratio implies that both companies have a
problem with liquidity. But WM Morrison
suffers it very much

Stock
Turnover

23.27

Debtor
Collection
Days
Creditors
payment days
Gearing%
Interest
Cover
Earnings Per
Share

3.95

29.12

42.02%
6.09

0.27

23.77

J Sainsbury PLC generates little bit more

turnover on stocks

1.80 J Sainsbury collects debt within a short period

31.16

WM Morrison pay their creditor little bit more

frequently than that of J Sainsbury

66.18%
6.79 WM Morrison has more profit than their
interest payment
0.32 J Sainsbury earn more per share

Dividends
per share

0.12

0.15

Market
Capitalizatio
n
Total Assets

7,236

5,846 WM Morrison has greater market value.

Working
Capital
Shareholders
Funds

J Sainsbury pay more dividend to their

shareholders

9,859

12,340 Total assets of J Sainsbury are greater than WM

Morrison.

-981

-1,104

5,397

5,629

It implies both company suffers serious

working capital problem.
Shareholders fund of J Sainsbury is slightly
better

As conclusion, it can be said that the financial performance of WM Morrison is better

although it suffers liquidity problem.

Conclusion
Capital is the life blood for a business organization. From the beginning to ending every
single second it needs capital. But always the owner cannot provide it solely. He needs to
collect it from various sources. But only collecting fund is not all for organization. After
collecting fund the main task begins. The fund has to be invested in an idle investment project
so that the stakeholders can receive the value. It is not possible without proper knowledge in
finance.