Financial Analysis And Report Of Dominos Pizza Finance Essay

Financial outline And score Of dominos pizza pie Finance EssayThis report is commissioned to disassemble the current and previous Short-Term Liquidity, Capital Structure and Solvency, Operating readiness and deriveability of dominoes pizza pie Group Limited. The method used in analysing includes, current ratios, perspicuousity ratios, profit margin, pure(a) margin, return on seat of government occupied, geartrain ratio, interest back, stock derangement, debtor age and creditor days.The results of the analysis depicts that dominos pizza Group circumscribed is operating well with consistent egress in employee turnover, profit margin but with a very spunky gearing ratio.The major areas of concern are the stock turnover, debtor days and creditor days which need effective and efficient management. Therefore it is recommended that the collection full stop for debtors and the representment period for creditors and the stock turnover should be monitored and improved.The analysis too has its own limitations which includes the unavailability of comparative information from the mirror comp whatsoever, SHS pizza Limited.AnalysisShort-Term LiquidityCurrent Ratio(x) confederacy200920082007dominoes Pizza0.691.010.92SHS Pizza Ltd0.180.221.29This provides the portion of the current liability of dominos Pizza Group which provide be settled with its current assets earnings. This shows the ability of dominoes to meet its short debt contracts with the avail equal to(p) current liability as the evanesce due.From the above table, dominoes Pizza Group had a current ratio of 0.69 in 2009 as compared to the 1.01 and 0.92 in years 2008 and 2007 respectively. The 0.69 in year 2009 shows that Dominos is not liquid enough to meet its short term debt obligations as at 2009 patronage it being better than the SHS Pizza Ltd at 0.18 times in the like year. With its brilliant surgical procedure in year 2008 at 1.01times, in 2007 it went somewhat below its ability to cover the current liability with its current assets at 0.97 times unlike the SHS Pizza ltd which had a better performance in ratio of 1.29 times in 2007. (Tracy J,2008 P287).Liquidity RatioCompany200920082007Dominos Pizza0.640.970.85SHS Pizza Ltd0.120.161.17The ability for Dominos Group to repay short-run creditors out of its available total bills is less than the general doorstep of 1.00. In 2007, Dominos had a liquidity ratio of 0.85 and maturationd to 0.97 in 2008 but fell drastically in 2009. Comparatively, its mirror company, the SHS Pizza limited performed better being able to cover its short term liabilities richly by 1.17x in 2007. However, SHS Pizza ltd also had a drastic fall from 1.17x in 2007 to 0.16x and 0.12x in 2008 and 2009 respectively. (www.advfn.com)Capital Structure and SolvencyGearing (%)Company200920082007Dominos Pizza413.87321.59435.34SHS Pizza Ltd988.47665.44175.68From the balance sheet of Dominos plc, it cornerstone be seen that it had a long term deb t of 18million in 2007 which reduced further to 9million in 2007 and was eventually cleared in 2009. On measuring the amount of swell that is borrowed, the gearing ratio for Dominos Pizza as at 2007 was 435.34% fall slightly to 321.59% and 413.87% in 2008 and 2009 respectively. With this high gearing, it indicates that the proportion of Dominos group borrowed crownwork is high. However its mirror company, the SHS Pizza ltd had a reasonably lower gearing ratio of 175.68% in 2007 increasing significantly to 988.47% in 2009. These figures show how given both Dominos Group and SHS pizza ltd is to financial distress. Borrowing is a risk to Dominos because of the associated high interest payables and and so Dominos lead be in a dangerous position if the interest grade increases. (www.bized.co.uk).Interest CoverCompany200920082007Dominos Pizza62.0030.2541.72SHS Pizza Ltdn/an/an/aTalking of interest, the interests cover for the Dominos group has improved significantly over the last trine years. In 2007 it had 41.72x but dropped to 30.25x in 2008, it later got better in 2009 with a 62x cover. This is a good indicator that Dominos group is able to pay its interest with its available operating profit. This significant improvement could be as a result of effective dominate of Dominos expenses and the consistent increase in turnover of 92,018 in 2007 to 128,076 in 2009. (www.bized.co.uk).Operating Efficiency harvest-tide line disturbanceCompany200920082007Dominos Pizza54.9952.0744.67SHS Pizza Ltdn/an/an/aAs at 2007, Dominos Pizza plc had a stock turnover of 44.67days. It began to increase to 52.07 days in 2008 and again increase further to 54.99 days in 2009. This means that it is belongings stock for overnight than the previous years and could consequently increase the comprise for holding these stocks. It is therefore important that the Dominos Pizza Group improves on its stockholding period so as to reduce its associated appeals. All different things bei ng equal, as Dominos products is food and can easily spoil, it is inevitable that the stockholding period be reduced to avoid bulk barbaric of products and as a result material costs.Debtor Collection (days)Company200920082007Dominos Pizza7.3411.1114.71SHS Pizza Ltdn/an/an/aDominos Pizza was able to get cash from its debtors within 14.71 days in 2007, in 2008 it was able to retrieve 11.11days whereas in 2009 was 7.34 days. From the above table, Dominos Group has been able to maintain a estimable improvement in its debtors collection days from 14.71days in 2007 to 7days in 2009. It is therefore important that customers of Dominos Pizza pay earlier so that this can be used to pay-off it trade creditors on time as well.Creditors pay (days)Company200920082007Dominos Pizza23.8421.5421.40SHS Pizza Ltdn/an/an/aDominos Pizza Group has been able to maintain a longer period in paying of its creditors. In 2007, it took about 21.40 days for Dominos Group to pay of its creditors. This furthe r increased to 23.84 days in year 2009. If Dominos is able to get more than credit period, it will be able to use the available pecuniary resource to maintain growth until the payment period is dew. Despite it being a good business practice for Dominos Group to get longer payment period in settling its debt, it is also ethical that it pays it debt on or before time.ProfitabilityTurnoverThe Dominos Pizza has free burning turnover growth for the past one-third years rising from 92,018 in 2007 to 128,076 in 2009. The turnover is entirely the sale made from the United state with a zero sales from oversees for the whole three years. The increase in sales was basically due to a higher(prenominal) demand of Dominos Pizza in the UK whereas the Zero sales in the overseas is as a result of unawareness of the Dominos Pizza in the oversees.Profit Margin (%)Company200920082007Dominos Pizza24.0518.4318.32SHS Pizza Ltdn/an/an/awww.fame.bvdep.comFrom the table above, the Dominos Pizza has been able to maintain a profit margin of 18.32% in 2007 and development further to 24.05% in 2009. This is as a result of the efficient control of the cost of sales and other expenses like the administration expenses for the past three years plus an outstanding increase in revenue from 92,018 in 2007 to 128,076 in 2009. (Kimmel PD, etal (2008) Accounting p243).Gross Margin (%)Company200920082007Dominos Pizza41.0539.7439.94SHS Pizza Ltdn/an/an/aSimilarly, changes in the gross margin will be as a result of changes in the Dominos Pizza group turnover and cost of goods sold. From the above table and diagram, we can see that the year 2007 had a gross margin percentage of 39.94% slightly dropped to 39.74% in 2008 and later rose to 41.05% in 2009. The cost of sale comprised of 60.6% in sale as at 2007 and a 59% in 2009.In the same period there was no information disclosed for public use for its mirror company, the SHS Pizza.Return on Capital Employed (%)Company200920082007Dominos Pizza112.58149 .71418.60SHS Pizza Ltdn/an/an/aIn 2007, Dominos Group had a good return on capital employed of around 418.60%. Despite the slight reduction, it continued to maintain a higher than 100% ROCE in the years 2008 and 2009 with 149.71% and 112.58% respectively.However using the ratio pyramid, the product of net assets turnover and the profit margin will give us the Return on Capital Employed. This is depicted in the table belowCalculation of the Return on capital employed200920082007Net Assets Turnover4.688.1222.85Profit Margin24.0518.4318.32Return on Capital Employed112.55149.65418.61Here, any change on the return on capital employed comes as a result of change in either the net assets turnover or the profit margin. From the above, it is the constant fall in the net assets turnover from the 22.85 in 2007 to 4.68 in 2009 which contributed to the fall in the ROCE from 418.6% in 2007 to 112.5% in 2009. On the other side, the profit margin continued to maintain improvement.The averagely high performance in ROCE indicates that, Dominos make good use of its assets well in profit creation. (Bedward and Strdwick 2004 p53)