Dissertation: Annual Report of Debenhams

Dissertation: Annual Report of Debenhams
11/04/2011 Comments Off on Dissertation: Annual Report of Debenhams Academic Papers on Business Studies,Sample Academic Papers admin

The annual report of Debenhams are also analysed to observe the facts of the company related to cash flows and the techniques of speeding of cash flows. The cash flows of the company like other retailing companies witnessed a decline in sales which also decreased the net cash flows of the company due to the global financial crisis and credit crunch. The company’s highest cash outflow was witnessed in capital expenditures and inventories and the inflows were dependent on the volume of sales both from stores and from online shopping.

The cash cycle of Debenhams also includes three elements of inventories, accounts payable and accounts receivable. As the sales of the company are the main source of cash inflow for the company and the reduced inventory frees up a substantial amount of cash, the company tries to increase its sales not only through its department stores and Desire stores but also through the online portal Debenhams Direct. Unlike Marks and Spencer, Debenhams pays its suppliers and creditors after a 53.2 average day’s period as compared to Marks and Spencer which can delays only to 17 days.

The receivable turnover days of Debenhams are 12.78 on average against 10.2 days of M&S. Debenhams should also try to reduce its receivable turnover days which are a very necessary from the cash flow point of view.  According to the annual report of Debenhams, the time between supplier invoices and actual payments for 2008 was 50.9 days and for 2007 it was 52.6 days. This indicates that the company has paid earlier by almost one day and compared to industry practices 58 days for payment of accounts payable is not a favourable situation. Though company managed to delay payments many more days as compared to M&S which pays after every 17 days, yet Debenhams can make can improved it further. Company should try to approach to the industry practice in delaying the payments to suppliers.

The company increased the speed of cash inflows by implementing various techniques in the overall collection structure. Its receivable period improved from the last year figures. In 2008, coampny was able to collect its receivable 14% earlier than the last year. Because of some measures like all major credit cards are accepted at all outlets while debtors and customers are provided with the facility of paying cash at all outlets as these outlets also serve as collection points. The short term cash requirements of the company are financed through a £250 million revolving credit facility which expires in 2011. The receivable management in the company is quite effective as most sales are made on basis of cash or credit cards and credit sales to customers are made with a background check and the credit history of customers is verified before sales but it is to be considered that receipts on some receivables may be delayed and affect the cash inflows of the company.

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