Essay: Marks and Spencer’s Financial Condition

Sample Essay

On the financial front, the company has displayed steady growth in revenues, operating profit and earnings per share from 2006 to 2008 but the global financial crisis which started in the later part of 2008 has affected the company as well and the company’s revenue and profits have declined in 2009[1].

The market capitalization of the company was 5.48 billion US dollars and its stock price was 347.10 (on 4-januray-2010). The net profit margins and debt to equity of the company were 5.51% and 1.62 in the year 2009. The interest coverage ratio was 6.1 in 2009. The debt to equity ratio of the industry was 1.10 and interest coverage ratio was 12.4 in the same year. This shows that company has relied heavily on debt financing and is not covering its debt cost from its Earnings before Interest and Tax (EBIT) as compared to the industry average. The leverage ratio is 3.9 as compared to 3.7 of the industry, which further confirms that company is highly leveraged and is facing the high financial risk. Probability, this is the reason why the company is using derivative and other interest rates financial instruments to hedge against the interest rates fluctuations.

[1] Marks and Spencer. ANNUAL REPORT 2009. 2009. (accessed 2010).

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