Boots-PLC Financial Report Case Study Example | Topics and Well Written Essays - 2000 words

Boots-PLC Financial piece of music - Case Study Example53).The net profit was 501.7 m in 2005 and 550.1 m in 2004 (Boots separate PLC Annual Report 2005, p. 46). The net profit margin has changed from 0.103 (2004) to 0.092 (2005). The fol minoring graph supports the information on the changes of group turnover, net profit, and net profit margin throughout the last 5 years.It is important to notice that patch the group turnover is increasing (more goods ar sold), the net profit are decreasing (non-operating costs are rising), and the profitability of the company is falling. Nevertheless it is high enough in compare with the main competitors Alliance UniChem had the equal net profit margin of 0.022 over two years (Alliance UniChem Key Financial Data, 2005) and J Sainsbury has lessen its net profit margin from 0.031 in 2004 to 0.020 in 2005 (J Sainsbury Financials, 2005). More detailed comparison is available in Appendix 1.Current assets of Boots PLC in 2005 were 1575.8 m, while the current liabilities were 1074.1 m (Boots Group PLC Annual Report 2005, p. 47). indeed current liquidity proportion for 2005 is 1.47, which means that a company discount meet its short-term obligations without undecomposed troubles. The current liquidity ratio for the year 2004 was 1.52, which means the ratio of current assets to current liabilities has decreased - definitely, not a good sign for the company.Looking at the cash flow statement of the Boots PLC one can see that cash inflow from operating activities has significantly decreased from 637.8 m in 2004 to 514.7 m in 2005 (Boots Group PLC Annual Report 2005, p. 48) due to lower operating profit and larger increase in working heavy(p). Still the main cash inflow comes from operating, which is a sign of financial health of a company. Also the company has increased its debt significantly by 668 m (Boots Group PLC Annual Report 2005, p. 64) reverting monetary resource to shareholders to make the balance sheet more effici ent. Therefore overall closing net debt in 2005 was 594.1 m comparatively to 148.5 m in 2004 (Boots Group PLC Annual Report 2005, p. 48).Long-term debt/equity ratio=long-term debt/shareholders equityLong-term liabilities of Boots PLC are 588.7 m (Boots Group PLC Annual Report 2005, p. 47). Equity shareholders funds are equal to 1,609.4 m (Boots Group PLC Annual Report 2005, p. 47). Therefore debt-to-equity ratio is 0.37, which is a low number indicating that a capital structure of a company can be shifted more towards utilize debt. The high liquidity ratio shows that it is possible to use debt furthermore.1b. Currently the companys use of retained earnings for financial backing its operations is low in compare to its use of debt. Nevertheless, high liquidity allows further use debt for financing. The capital structure of Boots PLC is not optimal the company should take the opportunity of increasing its debt for financing. The other ways of financing operations of Boots PLC can be achieved through the use common or premium stock.2a. I. Dividends