Financial Information-Daily Crest Group Incorporation

Financial Information-Daily Crest Group Incorporation

Question 1 Dairy Crest Group is a public limited organisation based in the United Kingdom. The most renowned brands of the organisation include Country Life butter and milk, Vitalite, Clover, and Cathedral City Cheddar cheese. Moreover, the organisation is known for delivering milk to more than 700,000 houses through their milk and more doorstep delivery business. The organisation is listed on the London Stock Exchange and it is a part of the FTSE 250 Index. Considering the products and services of the organisation under consideration, the principal activity includes the processing, manufacturing, and sales of fresh milk and dairy products not only in the United Kingdom but also in the Europe (Tracy, 2012).

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Question 2

Importance of Auditors Report with Respect to Financial Information

It analyses the auditor report play a vital role in order to assess the performance of an organisation in a more accurate manner. However, numerous elements must be considered by the auditor at the time of creating the audit report. It is a core duty of the top officials of Dairy Crest Plc to appoint a competent auditor that would help them to attain the set target of an auditor report. Financial statements are often used by external users in order to assess the performance of an organisation, for that reason the role of the auditor is quite crucial to minimise the risk of error that might increase the protection of shareholders and other related parties. Moreover, due to the advancement in the technology, most of the business makes use of it substantially that assist the auditor to play their part in a more proficient manner (Kramer, 2009).

Moreover, organisations produce financial statements that give data about their money related position and their performance. This data is utilised by an extensive variety of stakeholders such as financial specialists in settling on monetary choices. Normally, those that claim an organisation, the shareholders, are not those that oversee it. Consequently, the proprietors of these organisations (and additionally different partners, for example, banks, suppliers, and clients)take comfort from the autonomous affirmation that the money related articulations present, in every material regard, the organisation`s monetary position, and execution (Johnstone, et al., 2013).

In order to improve the level of trust in the financial statements, an auditor is engaged in to analyse the money related explanations, including related divulgences delivered by management, to give their expert sentiment on whether they decently reflect, in every single material respects. The organisations budgetary execution over a given period financial statements and monetary position are highlighted as of a specific date (an accounting report) as per GAAP (Moyer, et al., 2011).

The changing monetary and lawful environment has huge ramifications for an organisation`s operations and budgetary reporting, and changes in the business, economy and laws and regulations, for the most part, expand the level of threats influencing the business and require sufficient reaction and revelation in the money related proclamations. This additionally influences the way a review is directed, following the reviewer`s work needs to be scaled to address expanded dangers of material misquote of the money related explanations (Gibson, 2010).

 

 

 

 

 

Question 3

Ratio

Expression

2014

2013

2014 result

2013 result

Industry average

ROE

     

0.173

0.152

19%

 

Gross profit margin

     

1390.252

1380.87

10%

 

Net profit margin

     

0.036

0.034

3%

 

Current ratio

     

0.00176

0.0417

1.70

 

Inventory turnover period

     

112 days

44 days

50 days

 

Payable turnover period

     

518 days

607 days

20 days

 

Gearing ratio

     

1.785

2.203

4%

 

P/E ratio

     

0.0676

0.12

9.0 x

 

 

Question 4

 

 

2013

2012

% Change

Revenue (ex, VAT)

1391

1381.6

0.68%

Operating Profit

64.3

20.2

218.32%

Price

2.76

3.53

-21.81%

 

Question Number 5

Profitability Ratios

a.      Return on Equity

The return on equity is the amount of net income returned in the form of a percentage of shareholder’s equity. It is known to measure the profitability of the organisation by revealing the amount of profit generated by the organisation using the invested money of shareholders. The return on equity for the Dairy Crest is found to reflect an increasing trend from 2013 to 2014, which reflects that the organisation is efficient in generating income. However, relying on the ROE for determining the performance of the organisation for different reasons is not a better idea (Peterson & Fabozzi, 2012).

b.      Gross Profit Margin

The gross profit margin is the profitability ratio to measure the proportion of revenue being converted into gross profit. The higher values of gross profit margin for the Dairy Crest as of 2013 than 2014 indicate that the more cents are earned per pounds of revenue. It is considered to be favourable due to the availability of more profit in 2013 as compared to 2014 to cover costs that are not for production. Being the large manufacturer, the gross profit margin for the organisation is providing the level of production process being efficient (Peterson & Fabozzi, 2012).

c.       Net Profit Margin

Net profit margin is the basic profitability ratio to measure the percentage of net income of organisation to its net sales. It further represents the proportion of sales being left after the adjustments of expenses. The net profit margin for the Dairy Crest is higher in 2014 as compared to 2013, which means that the higher net profit margin reflects the level of competition, the elasticity of demand, and product differentiation (Gibson, 2010). 

Liquidity Ratios

a.      Current Ratio

The current ratio is the ratio of current assets of an organisation to its current liabilities. It is the most renowned test of liquidity of an organisation for measuring the ability of a business to repay the debts over the next year. The current ratio for the Dairy Crest as of 2013 and 2014 are below 1 showing that the organisation is possibly facing critical liquidity issues. However, the organisation is appeared to face liquidity issues more in 2013 as compared to 2014 because it means that the total current liabilities are more than total current assets in 2013 (Moyer, et al., 2011). 

Asset Management

a.      Inventory Turnover Period

The inventory turnover period measures the number of days an organisation takes to sell its inventory on hand. It estimates the number of days for which the average balance of inventory is required to be sufficient. The inventory turnover period for 2014 is higher than 2013 for the Dairy Crest, which implies that the organisation is required to reduce the level of inventories (Vandyck, 2006).

b.      Trade Payables’ Turnover Period

The trade payables outstanding are the average number of days in which organisation pays to its suppliers. The low payables turnover period for 2014 provides that the Dairy Crest is having a good working capital management because the organisation is using the early payment discounts (Chandra, 2008).

Others

a.      Gearing Ratio

From the above table, it is noticed that the performance of Dairy Crest Plc. in 2013 is quite better as compared to 2014 it means the top officials of an organisation should take some serious measures in order to enhance their performance to the utmost level (Gibson, 2010).

b.      Price Earnings Ratio

Price earnings ratio is used to evaluate the current share price of the company in comparison to the per share earnings. The table provided above shows that in 2013 the share price of Dairy Crest Plc. is lesser as compared to 2014 (Chandra, 2008).

Question 6

DuPont Analysis

 

Asset Turnover

1.73

1.40

22.98%

 

Sales

1391

1381.6

 

 

Assets

806

984.5

 

X

Net Profit Margin

3.61%

3.37%

7.00%

 

Net Income *

50.2

46.6

 

 

Sales

1391

1381.6

 

X

Equity Multiplier

2.79

3.20

-13.04%

 

Assets

806

984.5

 

 

Equity

289.4

307.4

 

=

ROE

17.35%

15.16%

14.43%

 

 

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