Ratios Analysis

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Contents

1. Introduction| 2|
2. Company Background| 2|
3. An examination of financial statements| 2|
4.1 Vertical analysis 4.2 Horizontal analysis| 23| 4. Key ratios analysis| 4|
5. Share issues| 5|
6. Conclusion| 5|
7. Bibliography| 6|

Table of Appendixes
1. Income statement – Horizontal and vertical analysis| 2. Statement of financial position – Horizontal and vertical analysis| 3. Ratio analysis - Liquidity and Profitability |
4. Ratio analysis – Efficiency and Investment|
5. FTSE 100 Index – weekly share prices table and graph| 6. Invensys plc – weekly share prices table and graph|

1. Introduction
This report gives an analysis of financial statement of Invensys plc over the past two years. The main aim of this report is to analyse company’s performance and to compare it with other companies working in the similar sector. The purpose of this report is to present the results of analysis to its potential stakeholders. The three form of analysis will be done on financial statements of this company (i.e. vertical analysis, horizontal analysis and ratio analysis), which will help us to examine the liquidity, profitability and efficiency of the business and to identify the investment opportunities that might be available to the company. 2. Company Background

Invensys is a global technology group providing software, solutions, products and services to control, optimise and automate equipment and processes in a broad range of industries and environments. “Invensys PLC grew out of the merger in 1999 of Britain's Siebe PLC and the British manufacturing conglomerate BTR PLC. Already the worldwide leader in the design, manufacture, distribution, and installation of controls and control systems as Siebe, the company has positioned itself to become a diversified manufacturing giant after merging with BTR and changing the company name to Invensys. While analysts have questioned the wisdom of Invensys' move from a relatively "pure play" controls and controls systems group to a diversified engineering and manufacturing empire, there is little doubt that the emerging company will become one of the world's leading manufacturing concerns with industry dominance in the high value-added controls and automation industries. The merger, at a price of approximately £6 billion, represents only the latest in a long span of acquisitions that had enabled Invensys to grow from a company producing revenues of just £370 million in the mid-1980s to a giant with annual sales of nearly £7 billion in 2002.” (Invency plc, 2003) 3. An examination of financial statements

Financial statements are the formal record of a business’s activities and its entity. There are three main types of financial statements: 1. Income statement – that gives information on company’s revenue, expenses and profit or loss over a specific period of time (usually 1 year). 2. Statement of Financial position – that gives information on business’s assets, liabilities and ownership equity at a specified time. 3. Statement of Cash flow – gives information on company’s cash flow activities, such as, operating, investing and financing activities. In this report, the ‘income statement’ and ‘statement of financial position’ of Invensys plc will be analysed. In order to do that, it is vital to calculate the horizontal and vertical analysis for the company’s financial statements that will give clear information on company’s performance over the last two years. 4.1 Vertical analysis

Income statement: (Appendix 1)
Looking at the vertical analysis of income statements, it shows that the operating expenses before exceptional items has increased in 2009 where as the profit before exceptional items have decreased as compared to 2008. The analysis shows that this increase in the cost of sales has affected the operating profit for the company in 2009. With regards to...
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