Historical Financial Analysis of a Listed Company

First of all, the introduction of the analyzed company should be made. As stated by the ASOS plc annual report:

ASOS.com is a global online fashion & beauty retailer, offering over 50,000 own-label and branded product lines across womenswear & menswear, to customers in over 190 countries from its central distribution centre in the UK (ASOS plc annual report and accounts, n.d.).

According to the companys 2012 annual report, ASOS plc attracts more than 17.5 million visitors every month. Moreover, about 8 million users and 4.3 million active customers from 160 countries were registered in accordance with the companys annual report. The companys’ aim is to be the leader of online fashion business around the world. The company is oriented on the young people who love fashionable clothes.

According to the ASOS Plc. 2013 annual report, the companys net operating revenues increased from ?8.1 million in 2004 to ?81.4 million in 2008 and ?769 billion in 2013. Additionally, the companys net income increased from ?0.66 million in 2004 to ?5 million in 2008 and from ?22.28 million in 2012 to ?40.9 million in 2013. It means that the companys financial state has improved a lot during the last ten years. Such situation can be explained by the increase in demand for the companys production. The overall financial analysis for the ASOS plc will be explored in the current paper.

It is noteworthy that in the process of the companys balance sheet analyses, we noticed that percentage of cash and cash equivalents in the structure of total assets a little bit increased from 25.6% in 2004 to 28.3% in 2008 and then it dropped to 22.8% in 2013. Generally, the percent of cash in the structure of companys assets was stable and high during the last ten years. Additionally, it should be stated that the percentage of accounts receivable decreased from 20% in 2004 to 12.9% in 2008 and 5% in 2013. Accordingly, it means that the companys situation with its doubtful and hopeless clients has improved during the last 10 years.

After the analysis of the companys income statement is made, it can be noticed that the companys total sales increased from ?8.1 million in 2004 to 81.4 million in 2008 and ?769 billion in 2013. Probably, it is a consequence of demands increase. Moreoevr, the companys net income has increased as well. That is why the companys effectiveness and scales of activity improved a lot during the last ten years.

According to the data provided in Table 1, the ASOSs ratios of profitability were practically at the same level during the last ten years. For example, the companys return on total assets was 13.5% in 2004, 13.9% in 2008 and 13.1% in 2013. For this reason, the companys effectiveness and profitability are quite high and stable. It should be also noted that all considered profitability ratios had the best value in 2008, while the worst values were in 2004.

According to the data provided in Table 1, the ASOSs current ratio decreased from 1.76 in 2004 to 1.36 in 2008, and then it improved to 1.53 in 2013. It is noteworthy that the value of this ratio responses to the normative values. It means that companys liquidity was high during the last ten years.

The next indicator is the quick ratio, and it is better for measuring the companys liquidity than previous indicator, because money is always money. It is well-known that cash is an absolutely liquid asset, and the company does not need to sell accounts receivable or merchandise inventories for repaying debts. This indicator is calculated by dividing such high-liquid assets as cash, short-term investments and accounts receivable over total current liabilities.

The data provided in Table 1 shows that the ASOSs quick ratio increased from 1.3 in 2004 to 0.77 in 2008 and 0.59 in 2013 and, as a result, the companys absolute liquidity decreased, but it exceeds the normative values. It means that the company does not have troubles with its liquidity.

Table 1.

The ASOS Plc Indicators of Financial Analysis.

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According to data provided in Table 1, it can be concluded that the ASOSs profitability ratios had high values during the last ten years. Its liquidity ratios decreased as well, but they exceeded the normative values. It should be noted that the problem of finding the optimal connection between the companys stability and its effectiveness is the most important task. Therefore, the companys liquidity and profitability ratios can be considered as high.

As it is known, such popular indicator as an inventory turnover ratio shows a period, over which firms inventory is sold and replaced. The main rule is that all indicators of turnover should increase. It means that current situation is improving and the company is developing. Such indicator as accounts receivable turnover describes a number of times that the accounts receivable is collected during the year. If turnover indicators must increase, indicators of duration of one turnover should decrease. Days sales in receivables ratio shows the average number of days it takes to collect an account receivable (Averkamp, n.d.). According to the data provided in Table 1, the companys debtors payment period decreased from 31.9 days in 2004 to 21.1 days in 2008 and 8.7 days in 2013. It means that the companys situation with its debtors improved, and the companys activity is improving as a whole. However, such indicator as the creditors payment period increased from 53 days in 2004 to 84 days in 2008 and 72 days in 2013. It means that it has become more difficult for the company to repay its debts. Also, such indicator as cash conversation cycle improved from 41 days in 2004 days to 33 days in 2013.

Additionally, the ASOSs financial stability was unchanged since debt-to-assets ratio increased from 0.33 in 2004 to 0.54 in 2008 and 0.487 in 2013. It means that the companys debts are 48.7% of total assets. It is important to mention that such indicators as the debt-to-equity ratio and gearing were a little bit deteriorated, but they are within the normative values. That is why the companys financial stability and solvency can be considered as safe. It should be noted that the companys state can be considered as safe if the value of this ratio is no less than 30%. As a result, the company has no problems with its financial stability.

To conclude, it is important to note that the companys total sales and net income increased a lot in 2013 as compared with 2004. Its profitability ratios, however, improved as well. That is why the companys effectiveness is rising. Also, the company does not have problems with its liquidity.

The companys cash flow should be considered in order to disclose the current tendencies. After the analyzes of the companys cash flow is made, it can be noticed that the companys net cash generated from operating activities increased from ?1.083 million in 2004 to ?10.1 million in 2008 and ?74 million in 2013. It is a very positive tendency, since it means that the ASOS became more effective and profitable company. Thereupon, the previously made conclusion about the rise of the companys effectiveness and profitability is right. The results of the ASOSs financial analysis only approve this conclusion. That is why the companys financial state was very high during the last ten years.

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