Itv Plc Financial Ratios

Topics: Financial ratios, Financial ratio, Generally Accepted Accounting Principles Pages: 5 (1623 words) Published: January 17, 2013
ITV Plc is a company on UK london Stock Exchange. This report calculates it important financial ratios to give a pitcure of its financial position in the market comparing by comaparing it to its industry average. From Annual report of year 2011 of ITV Plc .

Financial Performance Analysis:
This section aims to reflect the financial performance of the ITV Plc by analysing a range of financial ratios from the last two years. A comprehensive evaluation is provided of the significant ratios and later it is compared with its peers and sector ratios. Liquidity Ratios

Basically the liquidity ratios are used to determine a company’s ability to cover its short term obligations when are in financial distress and these obligations are due. Liquidity Ratios|
Ratios | Formula | 2011| 2010| Peer Average | Sector| Approach 1 | | | | | |
Current Ratio| Current assets/ Current Liabilities| 1.96| 1.93| | 1.8x| Quick Ratio| Cash and accounts receivables/ Current Liabilities | 1.59| 1.61| | 1.5x| Approach 2| | | | | |

Average Collection period | {Accounts receivable/ Annual credit sales}*365 | 7.5 Days | | | | Account Receivables Turnover| | | | | 6.0x|
Inventory Turnover | Cost of goods sold / Inventory| 5.79 times| 5.72 times| | No data avaliable|

Current Ratios
In current ratios the current assets are compared with current liabilities and depict the company’s ability to pay back its short term liabilities with its short term assets. The ratio shows a slight increase from year 2010 to 2011. ITV appears to be stronger than the industry average in covering its short term liabilities. ITV shareholders have little to worry about as the company is far from this risk of not meeting its short term financial obligations. This ratio here means that for every pound in current liabilities there is nearly £1.97 in current assets, hence ITV has sufficient funds for covering its short term liabilities. Quick Ratios

This ratio reveals the company’s ability to meet the short term operating needs by using its liquid assets. The has been a slight decrease in this ratio which means the company should focus more on its working capital management in order to ensure the existence of sufficient liquid assets in its balance sheet to cover it current liabilities in the future. Even than when compared it appears to be close to its industry’s average. Average Collection Period

This ratio basically measure the amount of time that it takes for a company to receive payments in terms of receivables. The average collection period for 2011 is 7.5 days. Inventory Turnover:
It can be seen that the inventory turnover ratio is slighter higher than the last year. This is a positive sign as higher inventory ratio indicates that as the inventories are the least liquid form of assets. Here it shows that ITV takes more than 5 inventories turns per year and takes nearly every 2 months to sell and replace all inventories. Profitability Ratios

Profitability Ratio|
Ratios | Formula | 2011| 2010| Peers Average| Sector | Operating Return on Assets| Operating return / total asset| 0.15| 0.13| | 9.66%| Operating Profit Margin| Operating profit / Sales | 0.19| 0.18| | 9.56%| Total Assets Turnover| Sales/ Total assets | 0.74| 0.67| | 0.8x| Fixed Assets Turnover| Sales / Fixed Assets | 1.48 | 1.42| | 14.1x|

Operating Return on Assets
This ratio shows how efficient the management is using its assets to generate earnings. It can be seen that there has been a slight improvement from 0.13 to 0.15 in 2011. It shows how much money invested in assets has been converted into net income. This is significantly important to investors, as it helps them in determining the company’s attractiveness for investing. ITV‘s operating return on assets is quite less than its industry average. The competitors are utilizing their assets more effectively than ITV, which as a result is...
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