2. Main Body2
2.1 Ratio Analysis2
2.2 Evaluation of Mulberry’s shares as a potential investment7 2.2.1 Revenue and Share price8
2.3 Funding and capital analysis15
2.3.1 Funding analysis15
2.3.2 Working capital18
2.4 Risk management and governance20
2.4.1 Corporate governance of Mulberry20
2.4.1 Risk & control management22
2.4.3 Information and Communication24
The company that we chose is Mulberry Group. PLC. This is a company that produces and sells bags and purses, as well as designs them for both individuals and other companies. We have chosen the annual report of Mulberry Group. PLC that gives us an in-depth view of the company’s finance performance, investment potential, capital structure and manage operating during the period of time which from financial year 2010 to 2011. With this annual report, we will try to analyze and critically appraise the company’s accounting information, market report and management control system.
The following content will be included in this paper: Ratio analysis, investment return, debt and capital analysis, governance and risk management.
2. Main Body
2.1 Ratio Analysis
Ratio analysis is frequently used in evaluating a company’s financial condition. The financial ratios are able to provide us significant information to analyse the company’s financial performance. Depends on these ratios, we can examine the condition of the company’s finance and check whether the results of the company’s operating meet its targets (Atrill and Mclaney, 2008). Normally, we will use cash flow, income statement and finance position to calculate ratios. In the ratio analysis parts, we will calculate and analyse the core ratios of Mulberry plc, these ratios will also be the base of the following parts of this article.
According to Mulberry’s annual report, during the financial year 2010 to 2011, the company has experienced a successful year. Mulberry Group’s business mainly focused on the UK market, and the revenues of this company comprised retail and income of design, as the demand of its products increased strongly during the past financial year, the sales raise rapidly. In this part, we will try to analyze the core ratios of the company and simply analyze the probable reason for the changes of these ratios.
To analyse a company’s profitability, there are three ratios concerned: gross margin, net margin and return on capital employed (Collier, 2009).
Firstly, we will look into gross margin. This margin mainly shows the relations between the costs and the price of finished goods.
Gross margin (2011: 65.35%; 2010:58.97%)
Gross margin is: (Sales - cost of sales)/sales * 100%
The gross margin in 2011: 79501 / 121645*100%=65.35 %
The gross margin in 2010:42487 /72052*100%=58.97 %
From the ratio, we can see that the gross margin of Mulberry increased to 65.35% in 2011 from 58.97% in 2010. The reasons that can cause changes in gross margin is the changes in prices and costs. In Mulberry’s case, the higher gross margin results from the dramatic improvement in revenue as well as cost of sales. According to Note 5, apart from the growth in sale of goods which caused by the impressive performance in new oversea stores and online stores, the 900,000 income, which disclosed in other income, received on the exit of the New Bond Street lease also contributes to the increase in revenue.
Net margin (2011:18.92%; 2010:6.74%)
Net margin is an important ratio to examine a company’s profitability. The formula is:
Net margin=Operating profit / sales * 100%, and the ratio for Mulberry is: The net margin in 2011: 23010/121645*100%=18.92 %
The net margin in 2010:...