Financial Management and Control - Kingspan

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Financial Management and Control Kingspan Assignment

6th December 2012

Contents
Introduction4
1.Profitability Ratios4
1.1Gross Profit Ratio4
1.2Net Profit Ratio4
1.3Return on Capital Employed (ROCE)4
2.Liquidity Ratios5
2.1Current Ratio5
2.2Quick Ratio/Acid Test Ratio5
3.Efficiency Ratios6
3.1Debtors Days6
3.2Creditors Days6
3.3Inventory Turnover Days6
4.Gearing Ratios7
4.1Gearing Ratio7
4.2Debt to Equity Ratio7
4.3Interest Cover7
5.Investment Ratios8
5.1Earnings per Share8
5.2Price Earnings Ratio8
5.3Dividend Cover8
6.Sources of Finance9
6.1Debt capital:9
6.2Lease and Hire Purchase9
6.3Share Capital9
6.4Creditor & Debtors10
6.5Reducing stock levels10
7.Conclusion10
7.Appendices11
7.1Appendix 111
7.2Appendix 212

Introduction
Below are the ratio findings based on Kingspan PLC’s annual report year ended 31st December 2010. The ratios are calculated for both 2010 and 2009. The ratios are as follows:
1.Profitability Ratios

1.1Gross Profit Ratio
20102009

Gross Profit333,694x100%=27.96%308,913x100%=27.45% Sales Revenue1,193,2151,125,523

There is a slightly higher Gross Profit in 2010. Kingspan are now holding onto .51% more of each euro of sales then they were in 2009. This is due to the increase in sales.

1.2Net Profit Ratio
20102009

Net Profit
(before Int & Tax)67,405x100%=5.65%62,659x100%=5.57% Sales Revenue1,193,2151,125,523

There is a slight increase of.08% in 2010 compared to 2009. If going by the gross profit ratio this should have been higher; this indicates that they need to manage their expenses more efficiently thus increasing their net profit.

1.3Return on Capital Employed (ROCE)
20102009

Net Profit (before Int & Tax)67,405x100%=7.65%62,659x100%=7.97% Capital Employed (W1)880,616786,676

Kingspan has been less efficient in using their capital in 2010; they are down by .32% from 2009. Although there was an increase in sales in 2010 the decrease in ROCE is due to the higher borrowings in 2010. If in following years they continue this trend investors could start to worry and sell shares. 2.Liquidity Ratios

2.1Current Ratio
20102009

Current Assets471,193=1.55:1398,212=1.31:1
Current Liabilities304,922303,529

The current ratio in 2010 shows that kingspan are managing their short term debt more efficiently than in 2009; this is due to increasing their current assets and managing to keep their currents liabilities relativity steady. They need to manage their debtors and stock better to further increase the ratio which will entice potential investors.

2.2Quick Ratio/Acid Test Ratio
20102009

Current Assets less Closing Inventory (W2)342,158=1.12:1287,391=0.95:1 Current liabilities304,922 303,529

In 2009 Kingspan may have had difficulty in paying their short term creditors but they have managed to increase it in 2010. Given the ideal ratio of 1:1 they could look at investing the surplus assets for a return.  

3.Efficiency Ratios

3.1Debtors Days
20102009

Debtors218,047x365=66.70Days181,071x365=58.72Days Credit Sales1,193,2151,125,523

Kingspan were managing their debtors better in 2009. There is an increase of 8 days in 2010; this could potentially lead to bad debt. Collecting their debt earlier will increase the liquidity of the business. They could offer discounts on early payment or offer a cash price. 3.2Creditors Days

20102009

Creditors93,024x365=38.68Days85,228x365=40.42Days Credit Purchases (W3)877,735769,671

Kingspans creditors days have decreased by 2 days meaning they are paying off their debts 2 days earlier than...
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