Below is the copy and paste of my word document for assessment 3. I have no idea how to include my spreadsheet so please email me and i will be happy to provide you my spreadsheet thank you. 

Step 1:

Ratio Analysis

Ratio have been calculated and spreadsheet is uploaded. Below is my understanding and representation of ratio and percentage value.

Figure 1.  Calculated Net profit margins of Berendsen PLC, from 2011 – 2014.

	2014	2013	2012	2011
Net Profit Margin	2%	8%	7%	2%

The above figure shows the relationship between the net profit after tax and the revenue earned. As it shows that in the year 2011 it seems to be a slow year for Berendsen with them only keeping 2% of dollar earned. By 2012 it proves to be a much better year with an increase of 5% from the previous year. From what I gather in Berendsen Annual report of 2014 they are doing well but this table seems to disagree with them only keeping 2% per dollar in 2014 which is a huge decrease from the previous year. I am assuming this could be due to a high operational cost for 2014 or other operational factors.

Figure 2: Return on Assets of Berendsen PLC from 2011 - 2014

	2014	2013	2012	2011
Net profit after tax/total assets	8.2%	29.9%	26.3%	7.5%

Figure 2 show the return on assets of Berendsen PLC, which is a relationship between the value of the assets and the net profit after tax. Its really interesting that in 2013 Berendsen shows that for every Euro held in assets 29.9% was retained as asset which is a big drop comparison to their 2014. This just further back up my observation from Figure 1 that other factors are responsible for the drastic drop in percentage value.

Figure 3: Total Asset Turnover of Berendsen PLC, from 2011 – 2014

	2014	2013	2012	2011
Total asset turnover ration	0.80	0.78	0.72	0.71

This ratio table shows the suggest how assets is use to generate sales. This table demonstrate that Berendsen have been showing each year that they are improving on how to use their assets to generate sales. A consistent increase of asset turnover year after year.

Figure 4: Liquidity Ratio each year current ratio of Berendsen PLC, from 2011 -2014

	2014	2013	2012	2011
Current Ratio	(1.38)	(1.18)	(1.36)	(1.48)

This ratio looks if the business is able to pay its liabilities. The above figure does not look good for Berendsen showing that in the last 4 consecutive years they are showing a negative number for their current ratio. Despite of what is published on Berendsen 2013 Annual report that Berendsen have a constant increase on their cash flow consecutively, which is an 11% increase of free cash flow from 2012 cash flow percentage.

Figure 5: Financial Structure of Berendsen PLC, from 2011- 2014

	2014	2013	2012	2011
Debt/Equity Ratio	-43.3%	-47.2%	-41.3%	-43.5%

This above table represent how reliant the business is on financial borrowings compared to equity. This particular table show’s that in the last 4 consecutive their debt/equity ratio is on a negative which is a positive for financial institution. Looking back to figure 4 Berendsen which got me confuse because it shows that they are unable to pay liabilities on time but the above figure shows that they are suitable candidate for financial borrowing company if ever they require loan. I don’t’ know if I have calculated the above figure right.

Figure 6: Equity Ratio of Berendsen PLC, from 2011 -2014

	2014	2013	2012	2011
Equity Ratio	38.8%	39.3%	36.3%	33.0%

Figure 7: Total number of share issue

	2014	2013	2012	2011
Total number of share issued	172.6m	172.5m	172.3	171.8

Figure 8: Market price per share

	2014	2013	2012	2011
Market price per share	1100	936.5	592.5	435.2

Figure 6 shows how much of the company assets financed by investors. Looking at how much the shares issued each year only a small increase each year which also represent in Figure 6 a steady slow climb of percentage on equity ratio. This could be due that the market sales value of Berendsen sale is quite expensive and a continues increase each year. For example, in 2011 the market share value is P435.2 in comparison to 2014 share price as P1100 an increase of over 100% in price value. Hence the slow rise of investors. Which in a way its good it shows that the company have more control over company.

Figure 9: Market Ratios for Berendsen PLC, from 2011- 2014

	2014	2013	2012	2011
Earnings per share (EPS)	0.14	0.52	0.43	0.13
Dividends per share (DPS)	(0.28)	(0.26)	(0.24)	(0.22)
Price Earnings Ratio	7,717.89	1,817.17	1,392.74	3,367.90

2014 was not a really good year for Berendsen to earn from share hence the big drop in the value. According to figure 9 in 2013 the EPS is 0.52 which mean the company earn 0.52P per 1P share in comparison with the 2014 results.

Berendsen DPS throughout the last four years is on a negative value I’m not so sure what this means since the other DPS of the other student is on a positive value I assume that the payout to shareholder is not good or that they didn’t get any payout at all.

Price earnings ratio this part I’m not so sure since the number value is so big high I’m lead to believe that my calculation is wrong for this part but I do believe I just followed the equation that was given out in the exemplar and the spreadsheet on how to calculate. I have compared my results with the other students but their value seems right and smaller value in comparison with mine.

Figure 10: Ratios based on Reformulated Financial Statements

	2014	2013	2012	2011
Return on Equity  (ROE)	5.07%	16.73%	14.84%	4.84%
Return on Net Operating Assets (RNOA)	4.17%	10.20%	8.86%	3.98%
Net Borrowing Cost (NBC)	3.03%	2.99%	3.14%	3.12%
Profit Margin (PM)	11.43%	23.56%	22.24%	13.18%
Asset Turnover (ATO)	1.26	1.18	1.10	1.08
Economic Profit	(55.7)	2.0	(11.8)	(63.2)

Looking at the Return on Equity it show’s that a big drop in value in 2014 compare to the previous year. This means that 5.07% of the shareholder’s equity are from the comprehensive income for that year. I am not so sure if this good or bad.

The RNOA for 2014 just like the ROE is low as well in comparison to its previous years and the lowest it has been in the last two years. I would assume that both ROE and RNOA should be more than it should to generate more profit.

Throughout the whole four years the NBC is considerably low which is good which means that the company is not spending so much to fund financial obligations.

Looking over at the profit margin for the 2014 its an almost drop 50% from the previous year. In my own opinion this drop does not look good looks like in 2014 the operating income is low which resulted to having a lower profit margin than the previous year.

ATO is calculated when sales are divided by the net operation assets with means the amount of sales for every dollar invested into assets. The results show that Berendsen in the last four years are able to use the operating assets to generate revenue for the firm.

Economic Profit

The economic profit for Berendsen vary each year, but mainly in the negative value. Im finding it hard to justify the results for this particular part due to I am not sure if I have calculated my restated financial report correctly.

Step 2: Capital investment decision

Berendsen PLC is considering to purchase a new machine their undecided on which machine to purchase either Machine A or Machine B. Below a table is generated to help decide on which product.

	Machine A	Machine B
Original Cost	£130 000	£180 000
Estimated life (years)	8	10
Residual value	£50 000	£70 000
Estimated future cash flows
Year 1	25 000	25 000
Year 2	27 000	27 000
Year 3	30 000	30 000
Year 4	25 000	25 000
Year 5	31 000	31 000
Year 6	28 000	28 000
Year 7	35 000	35 000
Year 8	25 000	25 000
Year 9		33 000
Year 10		40 000

	Machine A	Machine B
Payback Period	4 years and 8.9 months	6 years and 5.7 months
NPV	£19,333.15	-£1,249.89
IRR	14%	11%

By studying the above table it advisable for Berendsen to purchase Machine A. The above shows that it will only take Machine A 4 years and 9 months to pay and it’s NPV is not a negative value compare to Machine B which is a negative value.

Step 3: Feedback

Feedback for Mia Etelaaho

Step 1: As it shows everything looks okay with your spreadsheets your formula and that it is linkage to the other spreadsheet is done correctly. With your Word document everything looks good to. I like that you use dot points to summarise and express your interpretation and understanding with the results of the ratio calculations. I like the added touch of the economic graph to help us the readers understand your economic profit. Your reasoning about the drivers of the economic profit for your company sounds reasonably good.

Step2: You have presented a nice table easy to read and maybe I know its hard to extend this part of the assessment but the recommendation portion maybe try to elaborate more as to why option 1 is the better option.

Overall: Overall it’s a nice report to read and your understanding with accounting shows in this report, how you were able to back up your justification in regards to the calculation using accounting terms and knowledge and back up it with our spreadsheets.

Feedback for Suzanne

Step 1: As it shows all the calculations and formula is presented well on your spreadsheets and its link correctly between spreadsheets. With the Word document I like how you have presented your understanding and interpretation with the calculation results. It clearly shows that you have an understanding of the financial reports and able to back up your answers using your knowledge with accounting. Your reasoning to the economic profit drivers is nicely expressed although I can’t say myself if its right or wrong as I’m having trouble with my own economic section of this assessment.

Step 2: Nicely done and your recommendation is very good

Overall: Well done I enjoy reading your assignment throughout the whole document you have shown your understanding with accounting and further back up your justification with you accounting knowledge and spreadsheets calculations.

2013

139.8

2011

142.4

2012**STE

7.9

 2011

2012

2013