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Marks and Spencer Group Plc. is one of the largest British multinational retailer companies. It was situated in Westminster, London. The company is a public company that is listed with FTSE 250 index. The company was founded by Michael Marks and Thomas Spencer in 1884. The country holds more than 1400 stores around the world. The company does business in more than 57 countries. The size and profit margin of the company establishes the company as one of the biggest retail store company in the country. It is the value of the company that enables the company to do business more than 100 year. The values of the company stand at Touch, Integrity and innovation. The company’s customer service is one the best, which assists the business to be sustainable in the market and this is the reason why the company attract so many customers around the world.
To analyses the performance of the organizations the financial ratios are used. The financial ratios that are used for the analysis of the performance of Marks and Spencer are liquidity ratio, profitability ratio, solvency ratio, turnover ratio and market value ratio. To analyses the downfall of the company, the activity period which is considered is 2019 and 2018
To perform the analysis of the liquidity ratio, current ratio and quick ratio are being calculated. The liquidity ratio of the company states the company’s ability to meet the short-term obligations. As per the analysis of the annual report of 2019 and 2018 of Marks and Spencer, it can be determined that the current assets of the company in 2019 and 2018 are £1490.2 million and £1317.9 respectively. The inventory of the company can be determined that £700.4 million and £781 million in 2019 and 2018 respectively. Utilizing the data of total current assets, total current liabilities and inventories determines the current ratio and quick ratio of the company. Both the ratio provides the company’s ability to pay up the short-term liabilities. Among both the ratios quick ratio provide mist authentic result as the result includes actual current asset, which is excluding inventories. As per the analysis the current ratio of the company stands at 0.67 and 0.72 in 2019 and November 2018 respectively. On the other hand, quick ratio stands at 0.35 and 0.29 in 2019 and 2018 respectively. Both the ratio states that the company is not in good position as the company’s current liabilities are much higher in comparison to the current assets of the company.
To analyses the ability to generate profit from by decreasing the operating cost assets of the company that appears in the balance sheet of the company and shareholder’s equity, profitability ratio has been calculated. To search the above mentioned ability the profit margin ratio and return on equity are being calculated. As per the analysis the profit margin of the company stands at 4% in both 2019 and 2018 respectively. The return on equity stands at 16% and 15% respectively. The above analysis indicates that the company is generating profit from the market and the investment of the company is high, which actually generating considerable amount of profit for the company.
Solvency ratio of the company determines the company’s ability to meet the long-term debt obligations. The lower the solvency ratio the chances for generating the profits are high. To analyse the solvency ratio of the company, total debt ratio and debt-equity ratio are being calculated. As per the analysis it is determined that the company’s ability to meet the long-term liabilities is low and hence, this is the reason the company is losing the ability to generate profit from the market.
To measure the company’s ability to make customer base from the assets of the company, the asset turnover ratio is analysed. The asset turnover ratio is the part of the turnover ratio. As per the analysis the asset turnover ratio of the company for 2019 and 2018 stands at 144% and 142%. The above result states that the company holds substantial position to generate profit from the assets of the company.
To determine the value of the shares the price earnings is being used. This increases the ability of the company to gather investment from the market, which in turn will assist the company to enter into new projects. The P/E ratio of the company stands at 10.08 and 11.12 in 2019 and 2018 respectively. The results indicate that the company is in very good position when it comes to price of the share.
There are many events both externally and internally that affected the share price of Mark and Spencer between September 2019 and November 2019. The events are discussed below:
As the tension between the United States of America and China increases due to the rise in the trade war the multinational companies around the world are being affected. The situation has been escalated more when European market pull back from the bill that supports human rights in Hong Kong. China’s countermeasures against US bill of supporting Honk Kong affects the world trade. This is the reason FTSE250 has dropped sharply, which resulted almost all the companies losing ground. Retail sector for the company is the most affected sector and being the member of the retail industry and multinational companies member, Mark and Spencer also got affected by considerable means.
The media release made by the press affected Mark and Spencer reputation. The loss of reputation in the country hugely affects the share price of the company. As per InfoTrie Sentiment reports that have monitored over six thousand news and blogs and stated that all the coverage were against the goodwill of the company. This leads to the downfall of the company’s share price. As per the analysis the company impacts the share price and it brought down by 3 base point. This is the reason mark and Spencer opened the share price at $4.53 in the month of November. This is the reason the company has seen all time low share price at $3.93 and it reached maximum high of $8.22.
If the launching plan of Mark and Spencer gets labeled then the company is expecting to see a rise in sales. The sales of the company are expected to go high by 30% by next year. This will also increase the financial health of the company, which will be substantial for paying off the short-term and long-term liabilities. The option to pay online will also increase the revenue of the company. The increase in revenue and decrease in short-term and long-term liabilities will have considerable amount of effect on the share price of the company. Thus, the share price of the company is expected to rise. This will also assist the company to expand in more countries and hence the company can generate the profit from the market.
As per International Monetary Fund, the whole economy of Europe is going down in recent years. This is an alarming situation for every companies doing business in Europe. With the change in the condition of economy, the government tends to change the policies, which will lead to the effects in the business. Mark and Spencer will also get affected from this kind of trading policies. This affect will directly reflect on the share price of the company.
In the history of Mark and Spencer, since its inception, the company was always placed in the FTSE 100, but during the period of 2019, the company’s share got affected due to several reasons like declining of sales, increase liabilities and other external factors. These are the reasons the company was demoted from FTSE 100 and entered in FTSE 250. To be in FTSE 100 mans the company is having some of the highest market value in United Kingdom. The company’s demotion from FTSE 100 affects the company’s share price.
The activity period for the company is taken as 31st March, 2018 to 31st March, 2019. During this period the company has seen some considerable amount of change. These changes affect the company’s growth and revenue of the company. The changes faced by the company both internally and externally. In 31st March, 2019, the company’s stock price stands at 264.51 and in 31st March, 2018 the company’s share price stands at 256.70. This states that the company is in growing stage, but due to increase in company’s liabilities and growing tension worldwide the company’s financial unstable position. In later stage the condition of the company has fall more, which leads to the rise in company’s position.
The functions of the stock exchange market are immense. the functions of the stock exchange market are explained below:
The stock exchange market of the country is the representation of the financial condition of the company and country. The stock exchange market is one of the reliable barometers for the company. The changes in the income statement and the balance sheet of the company are reflected in the share price of the company. Thus, stock market is one of the favorable places for the investors.
Stock Exchange of the country basically values shares, bonds and debentures of the company. The security valuation is used for the investors, government and creditors. This valuation assists the investors to decide whether the company should invest or not.
The stock market provides substantial security to the transactions of the securities. It is the platform where the investors and the seller of the company can transact shares of the company. Due to the strict rules and regulations that are imposed by the stock market the chances of fraudulency decreases by considerable means (Hasan, Hoi, Wu & Zhang, 2014). Thus, this rules and regulations ensure safety in the stock exchange market.
The stock or shares which are sold or bought are actually the ownership of the company. The disinvestment and reinvestment process assists the investor to invest in creating investment proposal. The process of investment and disinvestment contribute largely to the economic growth of the company.
The liquidity of the stocks can be done only in the stock exchange market. This is one of the most major functions of the stock exchange market (Almeida et al., 2016). The stock exchange also enables the investors either to invest for long-term or short-term.
The participants of the stock exchange market include investors, traders, speculator, companies and even the governments and government agencies. The investors are the main people who actually invest in the different stocks of the company. The traders, on the other hand, actually trade stocks by selling and buying from the market. The companies are the participants who actually sales or buys stocks. The government agencies look after the rules and regulations of the stock exchange market.
There are several risks that are associated with the stck exchange market. The risks that are associated with the stock exchange market are discussed below:
Equity Risk: As the market price of the company varies all the time depending on the demand and supply of the company, the share price of the company rises or falls regularly (Abraham & Shrives, 2014). To mitigate the risk the investors needs to associate with the market very regularly.
Interest Rate Risk: The interest risks are associated with the bonds of the company. The bonds of the company bring the risk of losing money as the interest rate keeps on changing. To mitigate the risk the investors need to aware of the historical data and movement in the change.
Currency Risk: When the investors do business using the foreign investments then the investors may lose or gain money from the exchange rate. To mitigate the risk the investors need to hedge.
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