This report provides an analysis and compare of the current profitability, efficiency and financial stability of Premier Investments Ltd and David Jones Ltd over last 2 years. Methods of analysis include trend, horizontal and vertical analyses as well as ratios such as Gross Net profit margin, Inventory turnover and Current ratios. All calculations can be found in the appendices. Results of data analysed show that David Jones Ltd have better performance and is more stability than Premier Investments Ltd. In particular, Premier Investments Ltd’s profit had dropped almos half than the year before.The report finds the prospects of both companies in their current position are pretty positive. The major areas of weakness require further investigation and remedial action by management. Recommendations discussed include: Improving/increasing the profit of Premier Investments Ltd
Improving the return on equity, return on assets of Premier Investments improving/increasing inventory turnover of David Jones Ltd
The report also investigates the fact that the analysis conducted has limitations. Some of the limitations include: Timing, Information base and End use.
Table of Contents
1.0 executive summary1
3.0 Body of report4
3.3 Financial Stability8
4.0 Additional information10
6.0 conclusion and recommendations11
This report tends to analyse two organizations working in different industries. The purpose of this report is to conduct a ratio analysis of the two companies, and evaluate which of them is in a better and more stable financial position. For this purpose the report focuses on several profitability, efficiency and liquidity ratios. The ratios will be analysed on the basis of a comparison between the two companies and their past performance. This would reveal significant insight about the trends prevailing in the two companies. The first company is Premier Investments Limited, which is a company based in Australia. It is a publically listed company that is limited by shares. Established on 15 December 1987, Premier Investments Ltd. is an investment company that intends to maximize the capital returns to the shareholders by acquiring controlling shares in leading Australian companies. Premier particularly focuses on companies from import, retail and distribution industries. The second company is David Jones Limited, which is also called DJs. David Jones is a premier chain of Australian department stores. It was established back in 1838, and is one of the oldest running department stores that still operate under their original name. David Jones is one of the most popular brand names in Australia. In 2006 the logo of David Jones was listed amongst the top ten favourite trademarks of Australia. David Jones has well established department stores in all the major cities of Australia, with the exception of just Darwin and Hobart.
3.0 Body of Report
Profitability ratios are one of the most important ratios from the point of view of all the major stakeholders (Edwards & Hermanson 2007). The investors are concerned about the profitability because they want a safe return of their investment and a worthwhile return on it, too (Garrison, Noreen & Brewer 2010). The management is concerned about the profitability because the entire operations and the management bonuses are all tied to the profitability of the company. The creditors are interested in the profitability because they do not want to lend money to a company that is likely to go bankrupt because of poor financial performance (Smith 2007).
Premier Investments LtdDavid Jones Ltd
Gross profit margin59.09%59.51%39.73%39.11%